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SCRC Article Library: Cultural Affects on the Global Supply Chain

Cultural Affects on the Global Supply Chain

Published on: Apr, 26, 2005

by: Scott Hudson

SCRC

As manufacturing operations are relocated around the world, the efficient movement of goods is becoming more and more important. Logistics providers are responsible for the movement of goods and face different cultural challenges in each region that these goods move. People must realize and accept cultural differences to develop strong working relationships. Misunderstandings, loss of money, and loss of contracts can occur if cultural differences are not accepted. In a study by PriceWaterHouseCoopers, CEOs stated that the top issue they had in logistics was managing cultural differences with people (1). Cultural difference stories “may make for entertaining conversation years later, but the daily effort that’s required for smooth supply chain execution can sometimes be trying on business relationships (2).”

Cultural Difference Examples

  • In the United States, making money is the goal of most decisions. Companies in the U.S. employ the fewest people possible to get the job done. However, in some parts of China, the mentality is still to keep as many people employed as possible no matter what they are doing. Companies setting up operations in China must verify production capacity and worker quality to ensure the company has set up an efficient skilled labor force and that everyone has a meaningful job (2).
  • Contractual conditions are different in each country. In Brazil, due to constantly changing tariff, customs, and labor conditions, flexibility must be built into agreements as a condition for success. In Holland, the Dutch are as confrontational as Americans, so ‘push back’ during negotiations should be expected (2). In parts of Asia, contracts are just a general commitment to do business together and are less meaningful than personal relationships between individuals (3).
  • In Central America, workers may refuse to return to work until an exorcism has been performed in a warehouse they think may be haunted (3).
  • In Japan, since personal relationships are so important, a deal may fall through if a foreigner turns down an invitation to go on a “hashigo,” the Japanese version of a pub crawl.

Managing Cultural Relationships
The above examples show the different situations that can be faced when working in a global environment. If working in logistics or supply chain, a person will most likely face cultural challenges due to the global environment. A study by Deloitte revealed that 15 percent of North American manufacturers and 25 percent of western European manufacturers no longer manufacture in their home markets (3). To handle cultural differences, one must think and react with an open mind. Ann Murray, a strategic director of a logistics provider says, “We have to remember culture is a learned experience. It starts in our childhood, and we have to learn to work with people who behave differently (1).” She recommends developing multi-cultural teams to handle business issues. These teams create unity and are able to implement projects across boundaries, are more creative, and can develop better decisions due to accepting others (1).

Patience is also critical when working globally. Americans value speed when dealing with problems. Many other cultures place a strong emphasis on taking the time to consider many different alternatives before taking any action (3). Therefore, patience is required to let others go through the process of making the right decision. When setting up global operations, the learning curve is much steeper, so patience is required when expecting a payout (2).

Language and different units of measure are not the only problems companies face when working globally. Miscommunication between global partners can lead to severe supply chain disruptions. Patience is critical to succeed. Working in multi-cultural teams will improve global decisions. Culture must be respected and accepted when working in the global environment in order to avoid the “cultural complexities that can throw even the best managed global supply chains an unexpected curveball (3).”

References:

(1) Anonymous. It’s a cultural thing. Supply Chain Europe. September 2004,

(2) Shister, Neil. Managing Global Relationships in the Extented Supply Chain. World Trade. January 2004.

(3) Smyrlis, Lou. Cultural differences can trump the most logical of supply chain planning. Canadian Transportation Logistics. September 2004.

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