By Vakeesha John, Joel K. Seraphin, Sonecia De Shong & Jose Whyte
We write to draw attention to the critical role that supply chains and supply chain management play in our Caribbean’s economic development and to highlight the value they add to our social well-being as a Caribbean people. In this letter, we will also suggest a few recommendations that can positively affect supply chains and tremendously benefit all players within the supply chain process in our region.
“Supply chains are everywhere. From the biggest company in the world to running your household. We all have supply chain experience even if we don’t know it.” This online quote hints that supply chains exist in the smallest of ways and basically form a part of our everyday operations. Supply chains are formed from the interconnected process of transforming raw materials into finished products and services and delivering them to customers for consumption. While everyone might not be a supplier, manufacturer, vendor, customer service representative, logistics manager or delivery worker, some might just be customers, and customers too are a crucial part of the supply chain process. The demand and supply of goods and services form the genesis of supply chains.
Supply chains were once more rigidly operated and as the name suggests, one part of the chain was dependent on the other and so there was an almost linear flow of the process. However, in recent years, supply chain experts have discovered the overlooked complexities of supply chains and the non-linear patterns that can disrupt or facilitate the process. Thus, supply chains are also commonly referred to as supply webs. However, what is more important than simply discovering the complex nature of supply chains is the robust and strategic management of supply chains. Businesses, organisations and countries can benefit from well-managed supply chains in the forms of uninterrupted delivery of goods and services, lower cost-production, cheaper products and services, and increased quality in customer satisfaction.
Our Caribbean countries rely heavily on the tourism and agriculture sectors. In 2019, eight of the 10 most tourism-dependent countries in the world were in the Caribbean region. According to the World Travel and Tourism Council (WTTC, 2019), international tourism contributes, on average, to 20% of exports, 15% of GDP (Gross Domestic Product), and 14% of labour. According to the Food and Agriculture Organization (FAO), in many Caribbean countries, agriculture contributes between 7 and 17% of GDP. This means that import-export activities, marketing and movement of people, goods and services are crucial to the smooth functioning of our economies. Additionally, with globalisation and the vast technological advancements, many Caribbean nationals are utilising the digital platform to operate online businesses that involve the selling of products, for example, online boutiques, hair stores, auto shops, craft shops, food delivery services etc. Therefore, whether it be on a national level or a small-business level, supply chains are providing consumers with quality products essential for a comfortable life and are allowing populations to earn an income, while also allowing governments to trade and be able to development generate revenue.
Supply chain management, therefore, allows the players within the process to be able to supply goods and services to customers at a low cost while maintaining high-quality products and being able to make a profit (supply chain surplus). This is where risk management, logistics analysis, aggressive marketing, building, and maintaining relationships with suppliers, planning, forecasting, effective communication all come into play. Those qualities separate the businesses that may be able to survive the hassles of supply chains from those that will crash once there is a disruption in the supply chain. Disruptions manifest in the forms of delayed shipping delivery, natural disasters or climate change issues, scarcity of raw materials or overproduction of produce, global pandemics etc.
During the COVID-19 pandemic, many Caribbean islands had to close their ports, thus limiting the movement of goods and services. Cruise ships were unable to come to our shores, import-export activities decreased significantly and the cancellation of many carnival and other cultural activities that bring people to our shores put a dent in our economy. We must pay close attention to tourism supply chain management in the region as it involves a wide range of social and economic factors. Additionally, many small-business owners were frustrated as they were unable to receive their packages for customers and many families in developed countries were unable to send food for their families at home. This pandemic crashed some supply chains completely and delayed others. This leads to scarcity of products, fluctuating demand and supply, ultimately leading to higher prices for many goods and services.
The pandemic is one extreme example of how supply chain disruptions can create ripple effects and affect Caribbean islands that depend on the international community for trading and other economic activities. Another example is the Bullwhip Effect. This phenomenon describes how slight changes in consumer demand for a product can have a significant impact on supplier demand. For example, vendors may sell 100 cases of drinks in one week. However, in a week, they sell 150 cases. This then sends a message to the supplier and can cause the entire supply chain to adjust. This also happens in the reverse and can lead to shortages. Throughout the supply chain, this may result in inefficiencies, excess inventory, and increased expenses.
As small island developing states, we cannot afford a total shutdown of our economies during supply chain disruptions and neither can we afford the consequences of shortages or wastages of goods/services by haphazardly assessing the supply chain process. “All we are doing is looking at the timeline, from the moment the customer gives us an order to the point when we collect the cash. And we are reducing the timeline by reducing the non-value adding wastes”- Taiichi Ohno, father of the Toyota Production System (TPS).
Caribbean governments must carefully consider their diplomatic relations with international players, as sanctions and international politics can have great impacts on our supply chains. In a podcast with hosts Peter Schechter and Muni Jensen discussing the delivery hiccups of goods delivery from Asia to America during the pandemic and supply chains post Covid-19, Roberto Alvarez, Minister of Foreign Affairs of the Dominican Republic, explained his hope for the concept of “nearshoring” to come alive, stating that America can seek to manufacture more in countries that are closer than depending on Asia. He believes this can then lead Caribbean countries to rely less on China for manufacturing of goods. He highlighted that we could see the relocating of previously Asia-dependent manufacturing supply chains to geographically closer regions and that “in the case of the world’s largest market, the United States, nearshoring represents a big opportunity for countries in the Caribbean and Central American regions”.
He commented: “In 2018, then President Trump imposed a series of tariffs on the People’s Republic of China, beginning sometime in July/September of 2018. UNCTAD (United Nations Conference on Trade and Development) did a study in 2019, which looked at trade diversion that occurred from China to other countries between that summer of 2018 and around September of 2019 — 14 months. And it found a trade diversion of $21 billion”. What do the Caribbean governments think about this? How would this affect or assist our economies if there is a shift in trade reliance on China versus the United States?
While it is a fact that global events, such as pandemics and climate change, tariffs, sanctions etc. can impact our supply chains, strategical and careful planning can help to mitigate our losses and protect our economies. In essence, the efficient management of supply chains is crucial for maintaining a stable economy and ensuring that essential goods are readily available to our populations. By understanding and mitigating the bullwhip effect through strategic planning, forecasting, and collaboration with suppliers, we can minimise disruptions and ensure a more resilient supply chain.
The Caribbean must also take into consideration the importance of corporate social responsibility and the role it plays in supply chain management. The Corporate Sustainability Due Diligence Directive in the EU is a great guide as to what corporate social responsibility should look like. Respecting workers’ and consumers’ human rights, treating employees fairly through acceptable working conditions and fair wages, protecting the environment, and providing consumers with essential information on their products increase our competitiveness in the global market and force companies and states to maintain exceptional standards of operations within supply chains. This helps the Caribbean nationals to earn revenue and develop the economies, while preserving our natural resources by protecting our soil, roads and countries from pollution and environmental hard, and maintaining a healthy product for our tourism and agricultural sectors.
As we continue to navigate the challenges posed by the COVID-19 pandemic and other
global disruptions, it is more important than ever to prioritise supply chain management in the Caribbean. By investing in technologies, building stronger relationships with suppliers, and fostering a culture of transparency and collaboration, we can create a more agile and responsive supply chain that benefits both our economy and our communities.
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