Challenges in the Era of Globalization - iaabd

Challenges in the Era of Globalization
Edited by Emmanuel Obuah
World Bank (1997) note that poor governance (e.g., corruption, legal systems and crime prevention) are
relatively poor in developing countries. Saksson (2009) asserts that lack of requisite energy power can
bring production to a standstill as can be witnessed in many parts of Africa where only one in four
Africans has access to electricity. In reemphasizing the imperative of electric energy Saksson (2009)
stated that “… a world without electricity amounts to non-mechanized production. While erratic supplies
of electricity disrupt production, voltage fluctuations negatively affect the durability of machines. Better
electricity-related infrastructure can, thus, raise the efficiency and durability of physical capital.”
Research motivation
This research is motivated by the need to critically examine the growing supply chain disruption risks
confronting the Nigerian manufacturers and their supply chains. The Nigerian manufacturers and their
supply chains are exposed to an environment that is characterized by supply chain disruption risks
including weak infrastructure, high cost of imported inputs and port charges, fluctuating exchange rate
exposure, lack of access to credit, corruption and governance, incoherent or misguided government
policies, regulatory costs, shortage of talent, high taxes imposed by different tiers of government, among
others. Osalor (n. d) asserts that infrastructure deficit and exorbitant tax regime contribute to abnormally
high cost of manufacturing, thus eroding demand and profitability. Because of the power generation
deficiency the nation's production capacity has been curtailed, thus significantly eroding the ability of
firms to grow profits and provide shareholders with a decent return on investment. For example, Dunlop,
a Tire manufacturer in Nigeria recently relocated to Ghana because of its available and reliable generation
of electric power and enabling operating environment. Regrettably, those manufacturing firms that chose
to remain in Nigeria continue to provide their own generators to supply electric power for their
manufacturing operations. Thus, without access to reliable electric power, highways, railways, airports,
and seaports, the Nigerian manufacturers will continue to encounter high production costs that make them
less competitive or force them to close down. World Bank (1994) points out that the available and reliable
supply of infrastructure in developing countries is often relatively limited.
Arguably, inadequate infrastructure in particular has driven many companies out of business as well as
debarring many potential foreign and local investors from investing in the Nigerian manufacturing sector.
However, firms that brave the exposure to lack of infrastructure services must provide their own to
remain in business. Indeed, private provision of infrastructure to conduct business is not only
economically inefficient but also adds more cost to goods and services that consumers buy. It has also
been reported that according to MAN, Nigeria suffered an average of 60,000 minutes or 41.6 days of
power interruptions per year (Lartey, 2006). Macbeath (2008) contends that exchange rate fluctuations
not only have a significant impact on total manufacturing output, but also affect the distribution of output
among various producers.
Supply Chain Disruption Risk Sources
The perception that supply chains are designed for a stable world (Monahan et al., 2003) has exposed
manufacturers and their supply chains to disruption risks and vulnerabilities. Supply chain risk pertains to
any threat of interruption to the functioning of the supply chain operations (Christopher, 2003).
Kleindorfer (2000) argued that to effectively mitigate risks in supply chain one must first identify the
underlying sources of risks. Supply chain disruption risks in manufacturing operations can emanate from
many sources. Sources of supply chain risks emanate from environmental, organizational, or supply chain
logistics-related factors that cannot accurately be predicted and can impact the supply chain outcome
variables (Juttner et al., 2003). For example, in the Nigerian manufacturing operations context risks
originate from both domestic (e.g., electricity interruptions, access to credit, and transportation delay due
to poor roads) and international sources (e.g., high costs of imported inputs, exchange rate). Gallagher (n.
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