Global Supply Chain Infrastructure

The worldwide infrastructure for global supply chains involves transportation,

communication, utilities, and technology, but there are lots of tangents and important issues
that accompany those basic elements (for example, security, risks, value, legal considerations,
contracts, insurance, customs, and payment). Clearly, the world’s infrastructure planning can,
and maybe should, include a plethora of infrastructure issues that have effects on global supply
chains—whether in the area of logistics, purchasing, operations, or market channels.
Infrastructure, by its nature, involves a lot of basic organizational and physical
structures and operating procedures that support or hinder global supply chains. In essence, we
are talking about all the publicly or privately owned elements that are in place to facilitate
operating supply chains throughout the world. The vital among them are issues such as
transportation, communication, utilities, technology, security, risks, legal considerations,
commercial documents, customs, terms of payment, International commerce terms
(Incoterms), harmonized codes, and the like.

Transportation Infrastructure
The most obvious infrastructure-related issue for global supply chains is transportation. How
many nodes are there in a specific supply chain that spans some portion of the globe? What
transportation do you expect to use between each pair of nodes, and is that type of
transportation supported by the appropriate infrastructure (for example, roads for trucks,
railways for trains, and waterways for ships)? What type of packaging needs to be used to carry
the goods from one mode of transportation in the chain to another? And where in the chain can
delays be expected? These are just a few of the many transportation-related items that warrant
strategic and tactical planning.
Global supply chains depend on transportation infrastructure in the form of roads, railways,
airports and air space, waterways, ports, and warehousing. . What matters for the road
infrastructure—beyond the quality of the roads—are issues such as congestion, networks and
connections, and signage on the roads, including highways, roads outside cities and towns, and
streets in very populated areas.
Railroads have become more viable as a way to transport raw materials, parts, and finished
products in light of the increased congestion on highways and roads, the increased concerns
about pollution around the world, and the creation of effective and efficient multimodal
containers. The multimodal containers, in particular, eliminate the need to load and unload
products into and from traditional boxcars and have made the transportation much more
efficient and logical.
Airports are a critical part of the infrastructure for global supply chains. At the same time, we
have to realize that the kind of cargo carried by airplanes usually has a high cost. This means
that it will be a long time before air transportation will be dominant as a cargo transportation
vehicle, if that ever happens. Ships, trains, and trucks are just too good an option vis-à-vis air.
Now, for companies like FedEx, UPS, and DHL, and for component parts and finished goods
that lend themselves to air transportation, air is a natural complement to the transportation
infrastructure and has an important place in getting things shipped around the world.
Waterways around the world are perhaps the most critical aspect of the global supply chain
infrastructure. We have vast amounts of seawater on the globe, and lots of raw materials,
component parts, and finished goods are carried on various types of ships. Beyond the ocean
waters, which are relatively uncongested compared with other forms of transportation, we also
need to consider the depth and width of canals and other waterways that make up the beginning
and ending portions of ocean travels. For example, the size of the locks associated with
waterways is incredibly important. At this time, some of the internationally strategic waterways
and canals include the Bosphorus in Turkey, the Suez Canal in Egypt, the Panama Canal in
Panama, the Saint Lawrence Seaway in North America, and the Corinth Canal in the
Mediterranean.
Waterways would be marginalized if we didn’t have the necessary ports where small, medium,
and usually large ships can dock. It is not just the ports themselves, though. They need cranes
and other infrastructure items to load and unload cargo onto and from the ships. For example,
can the port cranes load the maximum number of containers a ship can carry? Ships typically
carry 13 containers side by side, but there is a possibility to carry as many as 18 containers in
the post-Panamax era (Panamax measures refer to the maximum specifications allowed since
the opening of the Panama Canal in 1914; ships that fall outside of the Panamax sizes are called
post-Panamax; in 2015, the “New Panamax” specifications will be in effect when the canal’s
third set of larger locks becomes operational). Other typical issues that come into play at ports
are unionized workforces with strict hours of operation and constrained port capacity, as many
worldwide ports are operating at maximum capacity already.

Communication Infrastructure

In the last decade, however, voice telecommunications has increased by about 10 percent,
whereas data transfers via telecommunications networks have roughly doubled every year. This
data transfer is critically important for effective operation of global supply chains—it has
changed the game from the agent’s being the gatekeeper of information to global supply chains
operating with maximum transparency. Now we know where our shipments are always (or at
least we should), and we have more control and involvement in where and how those shipments
flow from node to node and to the end customers. So, strategic development of the information
infrastructure to go along with the transportation of products is as critical as any component of
the chain. There are even lots of “apps” to tackle supply chain management issues—who would
have thought it! Broader than personalized apps, though, telecommunication and mail services
are the backbone of our communication infrastructure worldwide.

Utilities Infrastructure
An argument might be made that utilities are not really a global supply chain issue, and we can
agree that utilities influence many different aspects of global business, but these aspects also
include global supply chain management. In some way, we take it for granted that utilities such
as electricity, water, sewer, and gas exist and are available to support global supply chain
operations. These are minor issues in the broad scheme of things. Now think of the bullwhip
effect when it comes to supply chains and utilities. A small item at the beginning of the global
supply chain (or at any early point in the chain, for that matter) can ultimately have a large
effect down the line.
Switching to another form of utilities, think of energy. Energy pipelines allow the fuel required
to meet the world’s energy needs to be increasingly transported by pipelines instead of by ships,
trucks, and trains. Pipelines are typically the most economical way to transport large quantities
of oil, refined oil, oil products, and natural gas on land. These pipelines include gathering
pipelines (inbound supply chain pipelines), transportation pipelines (long pipelines with a large
diameter), and distribution pipelines (outbound supply chain pipelines). Think of the pipelines
that may transport gas to your house as the smallest and most distribution-oriented pipelines.
So, while we often forget the pipeline option, it is becoming more common throughout the
world, and perhaps your shipment (even if it is not oil derivatives) should be thought of in this
context.

Technology Infrastructure
Technology infrastructure is a component of the communication infrastructure discussed
earlier, but also, to some degree, a component of the related utilities infrastructure. In fact,
technology is all around us in various forms. As it relates to infrastructure and global supply
chains, however, we will center our attention on software and hardware that allow a firm to
manage supply chain operations effectively.
In that context, we can broadly talk about e-commerce being integral to international trade. E-
commerce helps break down the barriers of geographic distance, supports information
exchanges across all inbound/upstream and outbound/downstream nodes, and supports just-in-
time information exchanges. That typically happens before the products (raw material,
component parts, or finished products) arrive at the next node in the supply chain.
There’s now an array of options and systems for integration that you can at least consider,
depending on the size of your operations globally. These include electronic data interchange
(EDI); enterprise resource planning (ERP); collaborative planning, forecasting, and
replenishment (CPFR); vendor-managed inventory (VMI); warehouse management system
(WMS); and radio frequency identification (RFID), to mention a few of the most critical ones.