Expanding your Supply Chain into international territories comes with complex challenges that many businesses are not prepared for. With shipping fees, language barriers, and tariffs, managing the logistics of global supply chains can be an overwhelming endeavor.
These challenges come with risks to your business that can end in lost revenue, unnecessary expenses, and wasted resources if not handled properly.
This article explores four key challenges that businesses experience when establishing international partnerships, and solutions to help you overcome them.
One of the most prominent challenges of opening up international supply chains is the risk involved with foreign entities. Business relationships with international companies can be influenced by changing geopolitical situations that create unexpected tariffs or barriers. As the Russian invasion of Ukraine has shown, geopolitical tensions can rapidly shift and severely impede international supply chains.
Stay up to date on geopolitical news, especially with all countries that impact your supply chain, and be aware of any potential political matters that may put your business at risk. This can include building tensions between nations, wars, or closed borders, as well as broader events like natural disasters, climate emergencies, or changes in political leadership.
Consider investing in insurance policies that cover these types of global risks, and diversify your business to other suppliers and partners to avoid a total standstill in the case of an unforeseeable event. Many companies are also turning to AI to help them monitor geopolitical risks.
Machine learning and advanced algorithms reduce the need for regional experts, and instead, collect data from a multitude of sources in order to produce warnings about potential risks. For example, AI company Predata uses machine learning to analyze online behavior, such as what people are searching or viewing in over 180 countries. As the name suggests, this data can help anticipate unrest, helping CEOs and supply chain managers make smart decisions.
Quality and safety compliance standards vary from country to country, leading to discrepancies in a business’s product when the supply chain spans a multitude of nationals. Clearly communicate with your international partners your expectancy for quality standards and an acceptable level of defects in your products.
It may be helpful to establish third-party certifications that ensure quality and safety is consistent at every level of the international network. Many companies may also make use of third-party audits and inspections or regional experts in order to ensure their products meet the regulations of their destination market.
These quality standards extend to ethical labor and environmental standards as well, where companies should be aware of the ethical practices and social equity of their international suppliers. Manufacturing and production labor in developing nations are significantly less expensive than in most developed nations, but these often lack safety and environmental precautions.
As such, this comes with a major risk for companies and workers. The 2012 Dhaka Factory Fire was a result of poor working conditions and a severe lack of safety standards that resulted in the fatalities of over 100 workers. This type of accident is not only tragic, but can also greatly harm a company’s reputation.
When expanding to international suppliers, invest in good quality partners that practice safe and equitable treatment of their workers, as well as environmentally sound practices. Not only will this reduce vulnerability in your supply chain, but may boost revenue as well.
A growing number of buyers are switching to fair trade buying habits and are looking for companies that can boast ethical treatment of their workers and responsible environmental impacts. Take advantage of quality control audits and certifications that keep you and your international partners up to date on changing standards, and be open and honest with customers on your business’s ethical practices.
The rise in major e-commerce marketplaces has created an expectation among buyers that delivery times should be fast and cheap. Known as the Amazon Effect, many potential customers are dissuaded by smaller online companies that can’t provide delivery times similar to those of Amazon’s famous same-day delivery.
While this mindset is harmful to small businesses on every level, it can be especially detrimental to businesses expanding to other countries. Shipping products internationally can exponentially raise shipping costs, and delivery times may be increased to weeks or months.
Avoiding the effects of longer delivery times takes careful planning. Air freight shipping is significantly more expensive than oceanic freight, but it takes far less time. As such, oceanic freight should be used for the majority of shipping, whereas airfreight is used only for the occasional surge in demand or special orders.
Once your business has established a strong market in specific regions, it may be worth the investment of installing warehouses and manufacturers within those regions to generate greater access and avoid international shipping costs altogether.
Business operations with foreign entities always comes with the extra costs of foreign fees. These can include changing standards of international transactions, conversion rates, and tariffs. In a global supply chain where many goods are traded in bulk, small exchange rates can rapidly accumulate into major costs.
Partner with a bank that offers low international exchange fees, and be consistently aware of fluctuations in domestic and foreign currencies. You can also take advantage of these fluctuations by carrying out transactions when the USD is strong or while other currencies are weak.
Try to carry out transactions in bulk as much as practicable and consider focusing your market in regions like Jamaica that have more manageable exchange rates. Using Remitfinder, you can compare these rates and choose a platform that offers the best exchange rate for US Dollars to Jamaican Dollar.
Expanding your supply chain to new countries can be a daunting and risky undertaking, but managing the process with careful insight and thorough preparation can ensure minimized risk and unseen costs in all your business relations.