Universally accepted criteria for assessing risks and vulnerability of infrastructural systems in terms of global logistics and Supply Chain Management (SCM) have not been specified so far (Mattsson & Jenelius, 2015; Kermanshah & Derrible, 2016). Therefore, an approach developed by the American Society of Civil Engineers (ASCE) was implemented to estimate which infrastructure poses risks to global logistics and SCM. The transit infrastructural system, involving buses and heavy rail systems, is associated with the most risk because its capacity does not meet growing demands for transportation. Underfunding has resulted in its deterioration; thus, its condition poses threats to the safety of logistic operations (ASCE, 2018). Improvements in the maintenance of the transit infrastructural system require large capital investments. What is more, its resilience depends on topographic, climatic, and environmental conditions. The transit infrastructural system does not provide transport connections between continents.
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The world GPA can be estimated as C-. Ports, canals and waterways, airports, and rail infrastructures can be assessed in accordance with such grading criteria as their capacity, operating equipment, economic viability, transport system vulnerability, legal and regulatory environment, and resilience. From the perspective of global logistics, these infrastructures are assessed as follows:
- Ports – C-. Strengths of this transportation infrastructure include heavy lifting capacity, low-cost services, and length of haul zones. However, their capacity is sometimes inadequate, resulting in congestion; operating facilities require modernization and repair (ASCE, 2018). Operations significantly depend on associated roadways and rail lines (David, 2013). Regulatory requirements diverge in various countries.
- Canals and waterways – D. Some canals and waterways are too narrow to ensure free passage for shipping (David, 2013, p. 79). Navigable depth does not correspond to large ships that can carry up to 22,000 TEU (ASCE, 2018). The infrastructure is vulnerable to adverse weather and natural disasters (Mattsson & Jenelius, 2015).
- Airports – C+. Economically efficient and technologically advanced aircraft, rapid transportation, and regular communication between countries are advantages of this transportation infrastructure. Disadvantages include dependence on meteorological conditions, considerable fuel consumption, high cost of transportation services, and tough regulatory requirements (ASCE, 2018).
- Rail – C+. The infrastructure delivers mass flows of goods and passengers; its capacity can be increased by double-tracking (David, 2013). Transportation is not very expensive. The infrastructure requires investments in modernization due to aging boxcars in many countries.
The application of franchising is appropriate for the minimization of risks connected with entering a new market, investments, and production costs. Franchisees cannot use their own company name, logo, and production technology; they are only allowed to sell products or services of their franchisor. Franchising is effective for tried-and-true and easily recognized brands, such McDonald’s, Burger King, and others.
In licensing, a licensor provides a set of services limited to software use, technological production, right to use patents or brand names, and so forth. A licensee has more freedom in business operations. The use of licensing allows adjusting marketing and management to local conditions and avoiding risks associated with cultural peculiarities of the target audience of customers.
Contract manufacturing is another non-equity activity that allows a foreign manufacturer to produce or assemble goods designed by a hiring partner under a working agreement. Contract manufacturing is appropriate for the market expansion and promotion of goods, effective cost management, and control over the quality.
Parallel imports are the practice that involves the distribution of goods legally marketed in one country to another without the authorization of a property rights holder (Brekke, Holmås, & Straume, 2015). Instead of accredited distributive channels, alternative routes are used for products’ importation. According to Brekke et al. (2015), parallel importation of products stimulates “(intra-brand) competition in the importing (high-price) country, and induces price convergence across high- and low-income countries” (p. 93). Today, this practice is prevalent in the pharmaceutical industry of the United States, Canada, and many European countries due to opportunities for free movements of goods and control over increasing medical expenditures.
Current Trends in Imports and Exports
Export and import commodity flows are associated with structural indicators of the development of international trade. The examination of changes in exports and imports in 2012-2017 was based on statistical data provided by the Central Intelligence Agency (The World Fact Book, 2018a; The World Fact Book, 2018b). The comparison of indicators has revealed a gradual increase in international merchandise operations. However, there is a shift in the disposition of top countries related to both exports and imports. Although China, the European Union, the United States, Germany, Japan, and other countries have preserved their leading positions in exports, the Russian Federation has shifted to the twenty-third rank (The World Fact Book, 2018a). This change can be explained by current international sanctions. The disposition is similar in exports’ rating. The United States heads the list of countries by merchandise imports followed by China, the European Union, Germany, Japan, the United Kingdom, and others (The World Fact Book, 2018b). In the future, some changes in exports and imports for the European Union and the United Kingdom are anticipated due to Brexit.
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American Society of Civil Engineers. (2018). 2017 infrastructure report card. Web.
Brekke, K. R., Holmås, T. H., & Straume, O. R. (2015). Price regulation and parallel imports of pharmaceuticals. Journal of Public Economics, 129, 92-105.
David, P. (2013). International logistics: The management of international trade operations (4th ed.). Berea, OH: Cicero Books.
Kermanshah, A., & Derrible, S. (2016). A geographical and multi-criteria vulnerability assessment of transportation networks against extreme earthquakes. Reliability Engineering & System Safety, 153, 39-49.
Mattsson, L. G., & Jenelius, E. (2015). Vulnerability and resilience of transport systems: A discussion of recent research. Transportation Research Part A: Policy and Practice, 81, 16-34.
The World Fact Book. (2018a). Country comparison: Exports. Web.
The World Fact Book. (2018b). Country comparison: Imports. Web.