Risky Business: Global Expansion

Guest Post By Keith Wade, Associate Professor of Transportation & Logistics at American Public University

Part of the strategy of most businesses is to expand global operations. The world is a global village and expansions to various parts of the world bring goods and services closer to the consumers. From a business perspective, expansion is something that every business must consider as a way of increasing the customer base. While many businesses have succeeded, there are many risks that businesses expose themselves to in the process.

Encountering New Markets

Although expansions are mainly aimed at widening the reach of businesses, sometimes there are unintended expenses that can spoil the whole idea of increasing revenue margins. A common issue is increased cost of supply chain management. New markets mean new routes for manufactured products that come with complexities that result in high freight costs. For example, piracy in the East African region makes it expensive to transport products to East and South Africa. For businesses targeting this region of the world, the risks of expansion are clear.

Even when the products have reached their destinations, there are the risks of acceptance. Sometimes products have to be redesigned to meet the local demands and tastes.

Risks of Trading Abroad

Most importantly, international expansions expose businesses to foreign exchange risks. Going abroad means working in local currencies, which means a lot of currency exchange. Foreign exchange poses the risk that the value of an asset or liability will be altered because of a change in exchange rates. While there are many currency related risks, the most common is translation exposure. This is the risk that the translation of the value of foreign-currency-denominated assets is affected by exchange rate changes.

From a logistic point of view, international business expansions also lead to cargo shrinkage--the loss of products between the manufacturing point or point of purchase and the point of sale. In cargo transportation, the most common cause of shrinkage is theft by the cargo transportation or customs officials. While cargo shrinkage is possible in every means of transport, the problem appears to be most prevalent in international transportation.

Looking for better business opportunities abroad is a good thing; it increases the opportunities for revenues. However, in going international, businesses must understand and manage the risks of global operations.

About the Author

Dr. Keith A. Wade is an Associate Professor of Transportation & Logistics with American Public University.  He teaches courses in Supply Chain and Logistics Management.  Prior to working full time in teaching, Dr. Wade worked in the Logistics field for over 15 years. He was most recent a Director of Supply Chain & Logistics Management for Ford Motor Company in which he managed logistics responsibilities all over the world. Dr. Wade earned a PhD from Michigan State University in Supply Chain Management, an MBA from the University of Detroit, and a BSBA from Oakland University. Dr. Wade is a Six Sigma Black Belt.

RFID Grows from Common Sense Logistics to Potential Life-Saving Equipment

Guest post by Brenda Rector and Tommy Rector, faculty members, Transportation and Logistics Management at American Public University

Radio Frequency Identification (RFID) started out as a widespread way for logistics and supply chain companies to be able to track shipments. As research has become more sophisticated, the ways that RFID is used today have morphed to an unbelievable degree. When Mario Cardullo and Charles Watson invented the electronic technology in 1973, they had no idea where it would lead.

Most people who use RFID technology don’t even realize it. For instance, how many times have you used your E-Z Pass to avoid stopping to pay tolls? Also, when your car tells you that one of your tires is low on air, it’s because this information is transmitted to the RFID receiver within the car’s computer. Finally, when your dog goes missing, you’re able to locate it because of a chip embedded in its skin.

The military is also experimenting with embedding chips in service members. Being veterans, we can see the obvious advantages of doing so. If service members consent to the procedure the whereabouts of each airman, marine, sailor, and soldier can be tracked during warfare or in case of serious injury or enemy capture.

Not only can service members be tracked by location through GPS, but they can have their lives saved by storing their medical information on the same chip. Blood type, medical conditions, or allergic reactions can be easily transmitted to a receiver with encrypted passwords to access the information safely.

Such new RFID applications pose questions. As veterans, we wonder if service members will want to be “chipped”; even knowing the advantages, they may opt against it. As parents of three veterans, we would want our children to participate in such a program so they could be located via GPS in case of injury or capture.

There are still thousands of people who are listed as missing in action from military conflict. If we can keep families from being torn apart by not knowing, is this not a good thing? If we can locate our service members, we can help them in nearly all crisis situations. While we understand this is a potential privacy issue, consideration should also be given to the safety of our airmen, marines, sailors, and soldiers.

About the Authors

Brenda Rector is an adjunct professor and Tommy Rector is an assistant professor, both in the Transportation and Logistics Management Program at American Public University. They have been in the military and civilian transportation and logistics industry for nearly 30 years. They are in the dissertation phase of their doctorate programs.