Rise of China and India and Supply Chain Risks

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How has the rise of China and India as economic powers affected
the supply chain risks for international supply chains?
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Abstract
Over the last two decades, the business environment world-
wide has been rapidly responding to the pressure imposed
by globalization. In near about each and every industry, the
manufacturers, suppliers, the trade intermediaries, the
suppliers and the other networks have spread all around the
world becomes the companies world-wide are striving to
lower their costs while increasing the profit margins and
improving productivity. A significant shift in the paradigm
has been taken place in which the organizational that were
once locally or domestically located to sell globally now
look forward globally for their raw materials, finished
goods and services in order to sell into their respective
defined market. Such a shift us taking place due to the
reduction in the barriers to investments and trades and for
the lowered costs of transportation, the ease of flow of
information as well as the emergence of the economies like
India and China.
Supply Chain Management
A
B
In the fourth quarter or the end of 2015, the international
supply chain got increased and have resumed the worsening
trend in the global operational risk. There is a general
unease regarding the state of the global economy with its
increase in the operational risks as well as the Chinese and
Indian slowdown that highlights the emerging
vulnerabilities in the markets world-wide.
The end of 2015 was dominated by the non-economic news
like the Paris terror attacks as well as the continuous
refuges into the European countries combined with ever
increasing political resistance and controversial measures
that were basically aimed at curtailing the inflows Lee and
Gereffi (2015). While both these had very limited impact,
they do influenced the consumer confidence and the
investor confidence world-wide.
Furthermore, the Federal Reserve Lift-Off and the growth
deceleration in China had raised the concerns regarding the
vulnerabilities in the merging markets. There has been
increase in the business uncertainty and it continued to
stifle the confidence of customers that is very important for
a robut global recovery from the disaster.
Consequences
Global Economies
China and India is at present the top two rising economies
after United States and it has been assumed that China will
overtake U.S within few years (Knudsen 2016).
GDP comparison of India and China
Conclusion
References
Hence it is to state that the increasing demand for Indian
and Chinese products and the international markets is
opening new world of opportunities for the Indian and the
Chinese industries. The rise in their economies have
imposed significant challenges for many countries
including U.S.A and New Zealand. A shift in the paradigm
has been taken place in which the organizational that were
once locally or domestically located to sell globally now
look forward globally for their raw materials, finished
goods and services in order to sell into their respective
defined market. It is the result of the rising economies of
India and China.
According to Venkatesh, Rathi and Patwa (2015), supply
chain management is basically aimed towards managing the
flow of information, goods, finances and services among
the different networks of businesses in highly efficient
manner. There are several companies world wide that have
discovered the fact that effective management of supply
chain cuts down the costs while reducing the wastes and
preventing the over production. With the same, it also helps
in ensuring that the customers are highly satisfied with the
price, products and services. Hence, it is a very important
tool for ensuring stiff competitiveness in the global market.
However, notwithstanding this fact, it is also to mention
that coordinating with the material, finance, information
and products flow through every components in the supply
chain involves several challenges.
Gereffi, G. and Lee, J., 2016. Economic and social
upgrading in global value chains and industrial clusters:
Why governance matters. Journal of Business
Ethics, 133(1), pp.25-38.
Horner, R., 2016. A new economic geography of trade and
development? Governing South–South trade, value chains
and production networks. Territory, Politics,
Governance, 4(4), pp.400-420.
Knudsen, J.S., 2016. The Growth of Private Regulation of
Labor Standards in Global Supply Chains: Mission
Impossible for Western Small and Medium-Sized Firms?.
In Sustainable Value Chain Management (pp. 121-140).
Routledge.
Lee, J. and Gereffi, G., 2015. Global value chains, rising
power firms and economic and social upgrading. Critical
perspectives on international business, 11(3/4), pp.319-
339.
Lema, R., Quadros, R. and Schmitz, H., 2015.
Reorganising global value chains and building innovation
capabilities in Brazil and India. Research Policy, 44(7),
pp.1376-1386.
Vasilopoulos, P., Marcus, G.E., Valentino, N.A. and
Foucault, M., 2018. Fear, anger, and voting for the far
right: Evidence from the November 13, 2015 Paris terror
attacks. Political Psychology.
Venkatesh, V.G., Rathi, S. and Patwa, S., 2015. Analysis
on supply chain risks in Indian apparel retail chains and
proposal of risk prioritization model using Interpretive
structural modeling. Journal of Retailing and Consumer
Services, 26, pp.153-167.
India and China is becoming two international
manufacturing hubs for almost every nations for one or the
other product. The increasing demand and the international
markets is also opening new world of opportunities for the
Indian and the Chinese industries. This in turn is decreasing
the opportunities for the other countries. The ever increased
competition because of globalization is also making it
inevitable for the Indian and the Chinese industries to
provide some cost effective output products and services.
Graph 2: Growth in India and China GDP
Source: (Horner 2016)
Graph 1: Growth in India and China Population
Source: (Horner 2016)
Figure 1: Paris Terror Attack
Source: (Vasilopoulos et al. 2018)
Challenges
As per Lema, Quadros and Schmitz (2015), there are
several ways of combating the change in climate and
ensuring environmental sustainability. Sustainability in
supply chain is a significant business issue that is affecting
the supply chain or the logistics network of an organization
in terms of risks, waste costs and environmental costs. With
the same, there is an ever increasing need for an integrating
environmentally sound choices into the supply chain
management. It is to note that sustainability in the supply
chain is highly seen among the high level executives as an
important means of delivering the long lasting profitability
as well as for replacing the monetary costs, the product
value and the delivery speed.
According to the report on Supply Chain Sustainability by
Horner (2016), it has been revealed that shortage of
preparation is at present leaving the supply chains in India
and China more vulnerable to the risks of climate than the
ones in the Japan and Europe. The economic groundswell
of Asia is not new to anyone. The growing economic
stature of India and China is widely recognized. Both of
them are the two most populated nations in the world and
they account for 17.0% and 20.4% of the world’s
population respectively.
Increased risk of global supply chain
a) As the main trading partner is China, the economic
slowdown in the Chinese market and the final decline in
demand for the commodities had negatively influenced
the suppliers in Australian market.
b) There are several companies world wide that have
discovered the fact that effective management of supply
chain cuts down the costs while reducing the wastes and
preventing the over production (Gereffi and Lee 2016)
In China and India, the risk was all related to the regions
where the industries have considerable over capacity
and the local Chinese and Indian governments have
propped up the employment by means of their
influenced over the local present banks and this have
raised the risk of corporate defaults in the long term as
well as higher credit risk, which ultimately risked the
final supply chain management of the banking industry.
c) The supply chain risk was increased to a significant
extent in New Zealand. There, the Dun & Bradstreet
downgraded the risk outlook of the nations again for the
second time in the year 2015 and had driven about 40%
of the fall in the international prices of dairy products. It
resulted in the lowest level of dairy products price. Such
a slow recovery in the product prices in the year 2016
had resulted in decline in the prices of land and rise in
the non performing loans by 10% and 8% respectively
in New Zealand.
Graph 3: Global Economies
Source: (Knudsen 2016)