Management of supply chain is defined as effective administration of movement of goods, data and finances that are connected to goods and services from the obtaining of finished goods to the delivery of products to its final endpoint. Effective SCM is beneficial for all the organizations because it helps in better collaboration with suppliers, shipping optimization, facilitates better quality control, stronger cash flow, better data analytics & visibility, reduce overhead and inventory costs as well as improved risk mitigation. It is common for all the business to face the supply chain risks such as global political unrest, climate driven disruptions, economy & inflation, demand volatility, wars, business information risks etc. It is vital for the companies to alleviate the risks in order to enhance the supply chain process. Apart from this, the report will be based on the mitigation of supply chain risks. Additionally, the report will highlight the impact of US & China trade war along with the possible financial and economic crisis on the supply chain of eBay as well as the several challenges related to it.
Main Body
China and US War
China and US have been involved in trade war that includes in magnificent tariffs on particular goods which are imported from each other. This war significantly affected the trade patterns of the business between both countries. Furthermore, trade war has had spill-effects on both countries through trade diversion and global value chains. The influence of the China-US trade war on the supply chain of E-bay was remarkable for various reasons. When China is exporting the products to the US fell in between the 2018-2019 because of trade tensions. This war massively impacts the supply chain of US and China. The transportation of the goods by air from China affected immensely (Handfield, Graham and Burns, 2020). Wide ranges of top sellers in American’s favourite e-commerce marketplaces were originate from the operation of China. The Chinese sellers have capable to provide large volume of products at low price at paper-thin margins like eBay, Amazon and Ali express. For US customers eager to undergo longer shipping times, the savings as compared to domestic options can be affected.
In addition to this, due to this war eBay faced wide range of supply chain risks which directly impacts their overall operation and success. From this war, the customers were unable to receive the products on time which ultimately impacts its profitability. Shortage was one of the biggest supply chain challenges that faced by the chosen organization because of US and China war. The US primarily imports goods from China so due to this war this country was unable to deliver the goods which negatively impact the customer base and sales. The e-commerce massively impact of the battle between US and China may not be restricted to that region. Trade war was driving the inflation rates higher which can decrease the movement of e-commerce shipments with the help of supply chains because of their cost (Mancheri et al, 2019). Furthermore, a prolonged delivery time was one the major supply issue that is faced by the business due to the trade war between the countries. It was dangerous supply chain challenge for eBay in its shipment reaching its customers doorstep late because of war. Due to this war the delay in delivering the goods has been increased which can make it challenging for eBay to deal with the panic-stricken customers.
Due to this trade war the Chinese products were no longer to reach to the market which dis-balances the flow to the economy and leading to losses. It has been significant for eBay to eliminate the economic downturn at the time of trade war because the disturbance of supply chain directly affects the international trade. Raising the price of goods was another supply chain challenge that is facing by eBay due to US and China war. If the goods to be exported charged with higher charges or tariffs then manufacturers are forced to purchase them at higher price which increases the cost of finished goods (Itakura, 2020). In the inflationary environment, it was challenging for the business to run its supply chain smoothly. This leads to production line bottlenecks, shipping delays and warehouse stock outs. The inflationary climate of China significantly affects the overall supply chain of eBay. Along with this, as the tariff on the products increases then the cost of end products will automatically increase which results into reduction in the profit margins (Dong and Kouvelis, 2020). From the first assessment it has been identified that, the management of eBay put all the efforts in order to manage the supply chain effectively. eBay use the data visualization in its supply chain administration strategy that converts the all functions. With the help of this strategy, the chosen business facilitates additional organize the resources and deal with the challenges quickly to make the strategic decisions.
Apart from this, it has also been found that, to manage the supply chain effectively eBay is focusing more on sustainability. Integrating the sustainable supply chain practices help the business to minimize the legal risks by guaranteeing the lawful compliance with the changing environmental and labour requirements. By reducing the likelihood of trade war, eBay can minimize the supply chain disruptions which positively impacts on its overall process and brand image. To manage the supply chain effectively and mitigate all the risks, eBay can use the transaction cost theory of SCM. The transaction costs include creating, maintaining, using, governing and changing the organization of economic activity within a precipitously incorporated in a market or firm (Baldwin and Freeman, 2022). Implementation of this theory can be beneficial for the business to manage the supply chain effectively and reduce the costs which are incurred due to US and China trade war.
This theory helps in developing the long-term relationships with the customers and suppliers from which they are likely to retain with them for long-period of time. The transaction cost is an economic theory that offers an analytical structure for investigating the governance framework of contractual relationships within a supply chain. It is challenging for the business to completely avoid uncertainties because it deals with the orders of the customers which are randomly generated (Chong and Li, 2019). With the help of this theory, an uncertainty demand forces the business to develop the strong relationships with the suppliers to meet the market needs and develop the standardized products.
Furthermore, due to US and China trade war eBay was facing the supply chain issue of prolonged delivery time which directly impacted its overall supply chain operation, productivity, sales and profitability. Therefore, it has been recommended that, the chosen organization will need to build the strong relationships with the new suppliers. If the organization has strong relationships with the suppliers that they are deliver the goods on time from which it is capable to deliver the goods on time and increase the efficiency of the supply chain. Building the strong relationships with the suppliers can be beneficial for the companies because it helps in enhances the reliability and consistency of supply as well as increase cost saving and efficiency (Kapustina et al, 2020). eBay also faced the supply chain issue of raising the prices of goods because of US and China trade war. Due to this challenge the cost of goods also increases and massively impacts the supply chain. Thus, to overcome this supply chain issue eBay can focus on non-logistic planning which helps in minimizing the effects of inflation on the supply chain. Logistic planning can be useful strategy for the companies because it helps them to bolster the flexibility and flexibility of the supply chain to combat disruptions and endure reacting satisfactorily consumer demand.
Figure 1 depicts that, before trade war the improrting of chinese products into other counteries radpily increased. But after the trade war of US and China, it begin to impose high tariff in improting the products. From this, the importing of chinese products was fell down by $31 billion in 2019 (Richter, 2019).
Economic and Financial Crisis in China
Economic and financial crisis in China held in 2008 and it has significant effects on the global supply chain of organizations. In that time, due to this crisis the international trade was fall which ultimately negatively impact the overall supply chain, productivity, sales and profitability. From economic and financial crises in China various countries were experienced some adverse effects of decrease in trade with some organizations and nations were being severely impacted by it (Notteboom, Pallis and Rodrigue, 2021). One of the first outcomes of this crisis was the shrinking of credit that is utilized to finance inventory and production of the business. This issue was occurred by unexpected decrease in demand for finished goods that speedily deliver through supply chain and affecting various numbers of suppliers in all over the world. In addition, increase volatility in commodity and currency makes altered the risk and cost of international sourcing arrangements.
Some countries reacted with the corrective measures in order to foster exports and discourage the imports. After this crisis, most of the countries executed economic stimulus packages that created and modify shapes of demand and supply. Economic and financial crisis in China impacted significantly on the supply chain on eBay because it is unable to export the goods which negatively impacts the productivity, sales and profitability. The key situations of financial crisis as it effects the international supply chains are significantly in three areas such as cost effects, financing problems and logistical problems (Gurtu and Johny, 2021). Additionally, invading all three areas are greater risk and heightened uncertainty. This crisis leads several purchasers and suppliers in the international supply chain to refocus on risk management and stability with less significance on cost reduction. Due to the financial crisis, eBay faced several supply chain risks. In the China, majority of purchasers and suppliers in global supply chain are severely dependent on the security markets and banks to offer them with working capital to finances inventories, production and receivables.
Due to this crisis, eBay faced several supply chain management risks which directly impacts its overall process, profits and sales. Increase the transportation cost was one of the significant challenge that is faced by eBay due to economic and financial crisis within China. In this country, due to economic crisis the inflation rate was increases which increase the prices of goods and transformation costs on importing the other countries. In 2008, the inflation rate of China was 5.93% which as higher than as compare to precedent year i.e. 4.82% (Macrotrends, 2023). The high transportation cost was increasing the prices of the goods for eBay and it also sells the products to the customers by adding the shipping charges which was costly for them. From this, the customers were less likely to purchase the products which adversely impact the sales and profits of the business.
Apart from this, cost of raw material is another supply chain challenge that was face by eBay at the time of arising economic and financial crisis within China. Due to this crisis, the inflation rate of China was increase which raises the cost of raw materials and this ultimately impacts the manufacturing process. The cost of raw materials increases the manufacturing costs, prices of goods as well as transportation costs from which China was supplying the goods within US at higher prices which directly affects the profitability of organizations. The inflation rate is outcome in a heavily loss of organizational purchasing and consumer power (Yu et al, 2019). At the time of inflation, the procurement process of business becomes more complicated. If the increased costs are to be passed on to the purchaser then the demand of goods ultimately falls and directly impacts the supply chain.
Figure 2: Chinese GDP growth
From the abiove figure it has been determined that, due to econimic and finnacial crisis in China the GDP rate was raidlly increasees which increases the employement rates and higher contract with the suppleurs which postively impacts the business operation.
Aside from this, the suppliers failed because of financial inability to survive the unexpected fall in orders. Due to the financial crisis the suppliers faced the problems of buying the raw materials and delaying the fulfilment of orders. The financial crisis massively impacts the supply chain by increasing the total inventory and response time throughout the system. eBay also faced numerous supply chain challenges due to financial crisis. Difficulty in obtaining the credit is one of the biggest issues that are face by the companies due to financial crisis in country. At the time of crisis, the Chinese companies were unable to take the credit from banks or other financial institutions to manufacture the goods (Yu et al, 2021). Due to this, the organizations were failed to import the goods to US companies from which they suffered huge loss. Due to this, eBay was unable to take the orders of its customers because of prolonged delivery times which significantly impact its supply chain. Moreover, form the previous findings it has been determine that, to effectively manage the supply chain and increase resilience, eBay is deliver the goods to the consumers through container transportation.
Implementation of this approach to increase the resilience of supply chain is beneficial for chosen business because it facilitates efficient conveyance, provides worldwide presence and economies of scale. It has been also determined that, container transportation facilitates the organization to petition to clients internationally by providing its availability to a widespread global marketplace (Kovács and Falagara Sigala, 2021). To effectively manage the supply chain and increase the resilience, eBay can implement the resource-based view (RBV) theory of SCM. Adoption of this theory can be useful for the organization because it helps them to build adaptability, agility and alignment concerning SCM. The resources of independence, heterogeneity, allocation, imitability and use stand out in the creation of separate abilities to improve the business performance and increase the efficiency. To gain the competitive advantage over competitors and enhance performance the organizations have directed efforts to develop relationships and collaborating with suppliers and partners in order to offering benefits throughout the supply chain.
Furthermore, it is vital for eBay to take the corrective actions to alleviate all the supply chain risks. To diminish the supply chain risks the chosen organization can focus on supply chain mapping (Miroudot, 2020). Implementation of this tool of supply chain can be useful because it helps in increase the transparency and visibility. It represents knowledge of goods and material’s paths and origins and they set the anticipations for seller responsibilities. This tool can also help eBay in determine the potential risks which are associated with supply chain. This mapping can also help the business to legislative and regulatory compliance to make sure particular industry standards are reliably and correctly met and documented.
Conclusion
From the above report, it has been concluded that it is significant for the organization to increase the effectiveness and resilience of the supply chain by mitigating the risks. Elimination of supply chain risks can be essential for the business because it helps in improve business continuity, increase stakeholder confidence, better decision making and gain competitive advantage. In addition to this, China and US war as well as economic and financial crisis significantly impacted the supply chain of eBay. Due to this trade war, chosen business faced wide range of supply chain challenges such as shortage, prolonged delivery times, increasing the price of goods etc. To manage the supply chain effectively, eBay can focus on transaction cost theory of SCM. Apart from this, due to economic and financial crisis in China eBay faced various supply chain issues such as increasing transportation costs, cost of raw material and difficulty in obtaining the credit.
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Refrences
Books and journals
Baldwin, R. and Freeman, R., 2022. Risks and global supply chains: What we know and what we need to know. Annual Review of Economics, 14, pp.153-180.
Chong, T.T.L. and Li, X., 2019. Understanding the China–US trade war: causes, economic impact, and the worst-case scenario. Economic and Political Studies, 7(2), pp.185-202.
Dong, L. and Kouvelis, P., 2020. Impact of tariffs on global supply chain network configuration: Models, predictions, and future research. Manufacturing & Service Operations Management, 22(1), pp.25-35.
Gurtu, A. and Johny, J., 2021. Supply chain risk management: Literature review. Risks, 9(1), p.16.
Handfield, R.B., Graham, G. and Burns, L., 2020. Corona virus, tariffs, trade wars and supply chain evolutionary design. International Journal of Operations & Production Management, 40(10), pp.1649-1660.
Itakura, K., 2020. Evaluating the impact of the US–China trade war. Asian Economic Policy Review, 15(1), pp.77-93.
Kapustina, L., Lipková, Ľ., Silin, Y. and Drevalev, A., 2020. US-China trade war: Causes and outcomes. In SHS Web of Conferences (Vol. 73, p. 01012). EDP Sciences.
Kovács, G. and Falagara Sigala, I., 2021. Lessons learned from humanitarian logistics to manage supply chain disruptions. Journal of Supply Chain Management, 57(1), pp.41-49.
Mancheri, N.A., Sprecher, B., Bailey, G., Ge, J. and Tukker, A., 2019. Effect of Chinese policies on rare earth supply chain resilience. Resources, Conservation and Recycling, 142, pp.101-112.
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Yu, W., Jacobs, M.A., Chavez, R. and Yang, J., 2019. Dynamism, disruption orientation, and resilience in the supply chain and the impacts on financial performance: A dynamic capabilities perspective. International journal of production economics, 218, pp.352-362.
Yu, Z., Razzaq, A., Rehman, A., Shah, A., Jameel, K. and Mor, R.S., 2021. Disruption in global supply chain and socio-economic shocks: a lesson from COVID-19 for sustainable production and consumption. Operations Management Research, pp.1-16.
Online
Buchholz, K., 2023. Chinese GDP growth. [Online]. Available through :< https://www.statista.com/chart/16715/china-economic-growth/ >. [Accessed On: 5th January,2024].
Macrotrends, 2023. Inflation rate of China. [Online]. Available through :< https://www.macrotrends.net/countries/CHN/china/inflation-rate-cpi .>. Accessed On: 29th December,2023].
Richter., F., 2019. Impact of war on Chinese imports. [Online]. Available through :< https://www.statista.com/chart/18915/us-imports-of-goods-from-its-most-important-import-partners/.>. [Accessed On: 5th January,2024].
