Achieving Supply Chain Competitiveness

30 Apr, 2017 - 00:04 0 Views

The Sunday Mail

Chris Chenga Open Economy
It is also unwise for two countries dependent on similar industries, though at different stages of development, to standardise energy infrastructure for instance. David Ricardo left academics and economic governance with the theory of comparative advantage. As erudite as this theory remains up to this day, comparative advantage has also remained vulnerable to superficial interpretation by less industrious nations.
Comparative advantage is an economic law referring to the ability of any given economic agent to produce goods and services at a lower opportunity cost than other economic agents.
More simply, an economic agent is better suited to produce goods and services leveraged on the convenience of resources and means at its disposal.
Hence, Ricardo’s theory often serves to the notion of resource abundance as the distinguishing comparative and competitive advantage, of developing countries.
Unfortunately, this is not practically the case in many of our countries.
Interpreting comparative advantage through a superficial lens discounts the importance of supply chain competitiveness.
Competence in the production of goods or service, otherwise known as being industrious, goes beyond resources and means at a country’s disposal; or Ricardo’s comparative advantage in theory.
Industrious nations become so through efficiently managing supply chains from raw material to final good or service.
This is where developing nations short-change their theoretically sound comparative advantage.
Without well managed supply chains, comparative advantages are diminished and even overturned by other less resource endowed competitors.
Efficient supply chains on the other hand, allow a country to exploit its comparative advantage expanding its goods and services to overseas markets and establishing strong terms of trade.
So a question must be asked as to where Zimbabwe stands in terms of its supply chain competitiveness, particularly supply chains closest to its comparative advantages?
There is little doubt to our comparative advantage across numerous industries from agriculture, mining, tourism and services. Our proximity to resources and human capital is self-evident.
Less overt is exactly which metrics effect local supply chains and the remedial actions necessary to enhance supply chain competitiveness.
For instance, identifying bottlenecks along supply chains may seem simple, like pointing out roads, rail, transaction costs and such.
More astute and relevant though is to actually track competitive supply chain benchmarks to competitors whilst keeping those benchmarks within a context of our nation’s unique comparative advantages.
For instance, determining which logistics procedures and infrastructure to upgrade can be a challenging feat.
In Zimbabwe this is commonly versed as “Ease of doing business” benchmarked to World Competitiveness Reports.
However, determining logistics procedures and infrastructure to upgrade, simultaneously referencing them to comparative advantages is much more difficult.
Indeed on the World Bank Ease of Doing Business rankings, countries share benchmarks on logistics and connectivity; but less standardised is the customised utility of the kind of logistics and infrastructure to respective comparative advantages.
For example, heavy industry connectivity may not extract significant value for light industry or service oriented comparatively advantaged countries.
Consider the structural differences between tourism and extractives logistics and infrastructure.
It is unwise for a tourism dependent nation to invest in similar logistics infrastructure as say a mineral extractive dependent nation.
It is also unwise for two countries dependent on similar industries, though at different stages of development, to standardise energy infrastructure for instance. Consider India’s rather smart contestation to standardised carbon emission taxes to those of developed economies.
The emphasis here is that benchmarking supply chain metrics is good, however, each nation must do so cognizant of its own comparative advantages that it is looking to enhance to begin with.
Sometimes such as analysis is as fundamental as identifying the kind of supply chain conditions that cater to the development stage of individual country, as alluded to by the aforementioned India example.
Sometimes innovation trumps natural resources themselves that otherwise initially seem to be comparative advantages.
For example, Denmark, a country that gets less than a quarter of its year under sunlight developing fully solar charged industrial sites.
Or Israel exporting agricultural chemicals such as pesticides and herbicides, yet as country it is hardly exposed to the existence of such bugs and insects.
The management of supply chains either enhances or decreases comparative advantages.
Industries that stand as stalwarts for respective nations are fair testament to the competence of supply chain management.
Lastly, we cannot overlook the fact that global commerce has intertwined supply chains across borders than ever before. Consequently, we must critique the viability of locally self-sufficient supply chains versus cross border supply chains.
Neither structural preference is inherently better than the other; again it is a matter of how well a country manages its chosen structure.
As our balance of payment figures reflect through history, Zimbabwe has struggled to manage cross border supply chains, often resorting to import substitution interventions.
Indeed then it seems common consensus that cross border supply chains should be averted by all means.
Perhaps that is correct.
However, have we tried cross border supply chains on leveraged on the strength of our comparative advantages?
Maybe we can give deeper study to whether open economies are really a fallacy, or we just need to develop more astute and better managed supply chains leveraged on our comparative advantages that compete in a global economy?

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