What is one effect of globalization on supply chains?

Globalization significantly influences supply chains by raising both risks and opportunities. As businesses expand their operations globally, they gain access to new markets and can source materials and components from a wider array of suppliers. This presents opportunities for cost savings, increased efficiency, and diversification of supply sources. Companies can tap into regions with lower production costs or specific expertise, enhancing their competitive advantage.

However, globalization also introduces a complexity that can elevate risks. Supply chains become longer and more intricate, which can expose companies to geopolitical instability, fluctuating tariffs, supply disruptions due to natural disasters or pandemics, and challenges in coordinating logistics across multiple countries. Additionally, companies may face cultural differences, regulatory hurdles, and varying standards that can complicate operations.

Thus, while globalization opens up numerous opportunities for growth and expanded reach, it simultaneously requires firms to be vigilant in managing the potential risks associated with a more interconnected world, making the dual impact of globalization a critical aspect of modern supply chain management.