Coming to an Understanding

The value of plugging the cultural gaps in global supply chains

When supply chains span the globe, there are many factors that go into keeping them moving along smoothly. There are the logistics of moving components all around, gathering them in the same place for assembly, and sending the finished product on to the customer. There are seemingly endless data points that tell a lot about performance, measuring just about anything supply chain managers could care to know. As immensely helpful as all that is, there’s a human element often overlooked that is also critical to success. As supply chains cross borders, they encounter different cultures, each with their own ideas about how things should be done. If not navigated well, these differences can be as operationally damaging as any other disruption that arises.

Increasing Visibility

Data analytics have many stories to tell about how well supply chains are operating. With a renewed emphasis on visibility into all aspects of the chain, technology integration and info sharing with partners is increasingly important. But different cultures have different ideas around openness, cybersecurity, and exactly how much to share even with business partners. Coming to agreement on that integration and sharing requires patient and deliberate communication.

“The increasing number of global interactions does not necessarily lead to adaption of similarities among organizations, because studies show that with greater globalization comes more tribal behavior, and thus cultural behavior characteristics are becoming more distinctive,” wrote Mathias Doetzer in The role of national culture on supply chain visibility: Lessons from Germany, Japan, and the USA.

“The cultural dissimilarities among these entities can be a barrier for international operations, resulting in reduced profits for both parties, based on limited trust and conflictual negotiations.”

As much as data and analytics can tell, they work best as a supplement to person-to-person communication. Though travel budgets might have been cut, there is still immense value in getting a feel for conditions on the ground. There is much to learn about not only what is happening, but what’s about to happen.

“A robust supply chain requires regional experts who are familiar with not only local business customs but also will be on top of local or regional events that may impact the free flow of goods,” global trade expert Jeff Sutich told Supply Chain Brain.

To avoid getting lost in translation, businesses turn to tools like DeepL for accurate, real-time language translation in common dialects to make sure nuance and idiom get across. Cisco, which has more than 80,000 employees worldwide flexibility, uses a Webex hybrid work suite. Real-time media models analyze gestures and other cues that help provide context. The AI assistant also offers real-time translations in more than 100 languages. Meeting hosts can select from 14 spoken languages, which can then be translated into more than 100 other languages in closed captions.

“Technology can become a huge enabler from an empathy as well as a productivity perspective,” Aruna Ravichandran, senior vice president and chief marketing officer for Webex by Cisco, told BOSS.

Aligning on Expectations

With supply chains so spread out, a lot of the work is often only seen by other links in the chain as numbers on a screen. Production is where it needs to be or it’s not. But getting production where it needs to be can involve getting managers and workers in another country to increase output. This runs up against differing cultural views on labor and workplace hierarchies. Some countries rely on fast decisions from managers authorized to make on-the-spot pronouncements. Others have more rigid structures, with decisions going up and down several rungs of the organizational ladder.

Nearly two thirds of supply chain executives have identified cultural differences as a major challenge, as disruptions due to misunderstandings can increase operational costs by 15-20%, according to CEL Consulting.

“It is vital for companies to be mindful of cultural differences and to take the time to understand the local context in which their suppliers operate,” compliance platform Cargodian asserts. “This mindfulness may involve working with local partners or experts and using tools such as cultural assessments to better understand the cultural norms and values of the specific country.”

Crossing borders means paying taxes and duties and complying with shipping and other rules in each country that parts or goods are moving through. Staying compliant requires the real-time insight offered by supply chain compliance software like Navex and Sovos.

“For any business conducting commerce across multiple countries and jurisdictions, the continuous evolution of the tax landscape has become the norm. This is why we advise customers to have a long-term strategy when it comes to tax and compliance so that no one event or outside factor can disrupt your business operations,” Sovos president of revenue Alice Katwan wrote for PYMNTS.

When an alliance with Renault kept Nissan out of bankruptcy in 1999, it was the first major equity alliance between European and Japanese automakers. They had misaligned leadership styles and expectations around supplier management. The alliance managed to get by for almost 20 years, but infighting among executives and engineers and disparate corporate traditions eventually devolved so badly that CEO Carlos Ghosn was arrested in Japan on charges of financial misconduct. The French government, an investor in Renault, wanted a merged that Nissan did not want. Morale was at a dangerous low.

To recover, the companies focused the areas where they complemented each other and got back to what made the alliance work in the first place in joint projects that utilized the strengths of each. Together with third partner Mitsubishi, the alliance members are now unified in the Alliance 2030 electrification project that will share common platforms and technologies for 80% of their combined models by 2026. The project aims to launch 35 new EV models, with 90% produced on five common platforms, by 2030.

Abysmal working conditions at Chinese factories of its largest supplier led Apple to audit its supply chain in 2011-12, increasing transparency and enforcing codes of conduct for its suppliers.

“We believe every worker has the right to a fair and safe work environment free of discrimination, where they earn competitive wages and can voice their concerns freely,” Apple CEO Tim Cook said. “Apple’s suppliers must live up to this to do business with Apple.”

New Markets

As tariffs necessitate the forging of new supplier relationships, many businesses are looking to break into new markets. An understanding of the local culture can give new entrants a leg up against competitors also looking to break into the market. Consulting with a local expert can catch market entrants up to speed before a pitch.

“They can inform you of business customs, how long to expect the decision-making process to take, and who is likely to be involved,” consultant Ash Sobhe told Supply Chain Brain. “And they can help you navigate the difficult waters of local and regional government compliance and licensure, keeping you abreast of political developments that can impact your business.”

Local experts can help a business determine whether a potential partner’s values around issues like ESG and emissions align before what could turn into an awkward negotiation or worse, a regrettable deal.

“Understanding a trading partner’s business and social culture is every bit as important as understanding their product and their manufacturing processes,” Sobhe said.

With a proper understanding of a counterpart’s culture, you can ensure a good beginning to a beautiful friendship.