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As almost all production companies are focusing on becoming globally active, being able to move goods efficiently through the supply chain is getting more and more important. An international supply chain operates in multiple countries across the globe to increase cost-effectiveness by outsourcing parts of operations or sourcing raw materials from foreign countries. Cross-Cultural Supply Chain Management could also be called Global Supply Chain Management.

There are two perspectives surrounding SCM, the functional in which people focus on the operational issues within the supply chain. The second perspective is to view SCM as a management philosophy, looking past the traditional boundaries when it comes to managing supply and demand through collaboration and improvements through the whole supply chain rather than just focusing on logistics. The second perspective is the one that is becoming the widely adopted perspective for creating value and eventually gaining commercial benefits for the organizations. (Hornbrook & Yeow, 2004)

When operating in multiple countries, all aspects of the supply chain will face Cross-Cultural differences in each different region in which the goods move. If these cultural differences are not accepted and acted upon by the company which is involved, misunderstandings and culture-clashes could occur. This in turn could result in a loss of money and contracts. It is important to develop strong working relationships with all people involved in the supply chain by recognizing and accepting these cultural differences (Hudson, 2005). The impact of culture on risk perceptions of consumers and organizations cannot be ignored. (Hornbrook & Yeow, 2004)

History of Supply Chain Management

The first supply chain Supply chain management is not just a recent phenomenon, it has been around for many years. One of the world’s first globally accepted successful business model’s is the one of the Dutch East India Company (VOC). In the ‘’Golden Age’’, which was a time of economic and cultural prosperity in the 17th Century, the Dutch East India Company showed how an efficient organization of the flow of goods could lead to great wealth. (van de Hoeven & Lofvers, 2009)

The Dutch East India Company had established a vast network of places to source their raw materials all over the world. One of the reasons of their success is the development of logistical innovations such as the ‘’Fluitschip’’, which was capable of transporting bulk at a high speed over the seas. It can be assumed that the Dutch East India Company was the first Multinational with a global supply chain. (van de Hoeven & Lofvers, 2009)

However many aspects of their supply chain are still exemplary for companies today, their strategy concerning the dealings with cultural differences are not. They mainly operated by taking control of the foreign operations by force and only using a standardized management strategy globally.

From logistics- to supply chain management In the 20th century, supply chain management started to evolve rapidly. It all started by trying to make the logistical and production processes more effective in the 1940/50’s, following Frederick Taylor’s ‘Principles of Scientific Management’. Then, organizations sought to improve other parts of the supply chain such as warehousing, materials handling and freight transportation in the 1960’s. When the personal computers were created, in the 1980’s, a vast amount of new opportunities emerged. This new technology enabled huge improvements to be made in logistics planning and execution technology. During this time, the first logistics optimization models were also created by the Georgia Tech Production and Distribution Research Center. This was also the point where company executives came to recognize the complexity and importance of logistics management, it was from then on that it was seen as an area in which great opportunities arose to improve the bottom line of their company. Until the mid-1990’s, the term ‘supply chain was rarely used, however, due to the further developments in the industry and the globalization of manufacturing, the term ‘supply chain management’ became widely recognized. Supply chain management’s association with strategy is growing ever since. (Robinson, 2015) The distinction is between logistics- and supply chain management is, according to the Council of Supply Chain Management Professionals,"Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers' requirements" while "Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole." (Robinson, 2015)

Cultural Gaps in the Supply Chain

It is easily underestimated whether there are any cultural gaps in the supply chain of a company. Let’s take a European company for example which has its main office in Denmark but has outsourced production to Belgium, which is only an hour flight away and is also perceived as a western developed country. However, despite almost being neighboring countries, there are many cultural differences. The Danish are known to be very tolerant towards uncertainty and change in the business environment whereas the Belgians are very risk averse and resistant to change. Therefore, management decisions from the Danish headquarters might cause a disturbance in its relation with the Belgian employees. (Cross & Bonin, 2010)

Three approaches to culture This approach of categorizing and understanding cultural differences, as in the Danish-Belgian example, is also called ‘cross-national comparison’, is associated with the country of origin of the employees involved. This approach assumes that someone’s nationality says everything about their behavior, norms and values. It is a popular approach as most of these models are universally applicable, such as Hofstede’s cultural dimensions, but, it does carry the risk of stereotyping. As Cimanda Ngozi Adichie, a Nigerian novelist, said: ‘’ The problem with stereotypes is not that they are untrue, but that they are incomplete – They make one story become the only story.’’ (SCMO Supply Chain Advisors, 2014), basically meaning that you cannot judge a person just based on his/her nationality.

A second approach is known as ’ intercultural interaction’. This approach sees culture as something more than the given national culture. Rather than looking at people as individuals with a separate culture, in for example a Chinese-American joint venture, a new culture is evolved containing aspects from all the different cultures together with some elements of its own making (SCMO Supply Chain Advisors, 2014). This is also called a ’negotiated culture’.

The third approach to culture is the ‘multiple culture perspective’. In this approach, culture is not seen as something static but as something flexible and dynamic, containing various cultural aspects belonging to other groups in which the individual takes part rather than just their nationality. In this approach, culture is also seen continually evolving and this is speeding up together with technological developments, absorbing new cultural ideas every day. An organization is seen as a society where multiple cultures come together where individuals participate in the organizational culture as well as other various cultural groups, meaning that a person does not have ONE culture. This approach is most suitable the nowadays’ business environment, especially because everyone has become more interconnected through their smartphones, tablets or computers and it is no longer possible to categorize people in a single category.

Diversity management in the supply chain

Now that we know how to recognize the cultural gaps between employees of an organization, the how and why to manage this cultural diversity will be explained. Two types of diversity management are ‘Intranational Diversity Management’, which focuses on managing a diverse workforce in one country, and ‘Cross-National Diversity Management’, focusing on managing a diverse workforce in multiple countries (Mor Barak, 2010). Cross-National Diversity Management is the area that correlates with the global supply chain as its main focus is also on managing globally rather than nationally. One of the greatest challenges that have be overcome by any multinational are the differences in business in social practices in different countries. The unique cultural settings of each country set certain expectations of performance, these expectations could be dictated by the host country’s laws, business and social customs as well as etiquette and protocol (Godiwalla & Bronson, 2015). Let’s take a South-Africa based company for example, while they need to compel to the law of equality in their home country, when they decide to start producing in the Middle-East they will have to treat it’s employees according to the Islamic laws on gender roles in society (Mor Barak, 2010). In order for any supply chain environment to be effective, the firm would have to adapt to local cultures, infrastructure, supply chain practices and the level of technological capability (Godiwalla & Bronson, 2015).

So why should all organizations dealing with supply chain management implement diversity management strategies? Three types of argument in favor of diversity management are: (Mor Barak, 2010)

1. Reality: Diversity in the workforce is growing, and businesses have no choice than to accept this and adapt accordingly to keep up with competition. Also, an organization dealing with a global supply chain is already forced to face workforce diversity within their organization and cannot avoid adjusting their strategies for success.
2. Ethics: This argument taps into the moral and ethical reasoning for diversity management stating that all companies have an obligation to promote social justice and equality. Nowadays, it is impossible for any company to operate without the approval of society.
3. Opportunity: By managing diversity successfully, an organization will be able to optimize their supply chain in multiple ways. By adjusting their strategies to a diverse workforce, an organization will be able to cooperate with a greater amount of subsidiaries from different cultures as they will be happy to work for a company that is considerate of their cultural values. Also, the subsidiaries they are already working with will be stimulated to increase productivity and efficiency for the mother company.

Arguments for managing diversity in the supply chain have been presented and now it is time to show some ways of how to successfully manage diversity (Godiwalla & Bronson, 2015):

1. Choosing the right supply chain structure: A multinational company has the choice to adopt an centralized, moderately or very decentralized organizational structure for their supply chain. Very decentralized structures are often perceived as the most effective structure to manage diversity, with foreign subsidiaries wholly focusing on the their domestic country’s cultures, preferences, supply chain and operating conditions.
2. Training and empowering supply chain members: Empowering suppliers and their suppliers can be an effective way for companies to manage diversity. By delegating responsibility to the supplier for the production of a certain product, providing a clear set of standards to which the product has to fulfil together with the full freedom of how to reach those standards, innovation is stimulated according to the supplier’s own methods.
3. Managerial training: Supply chain managers should possess a larger and more diverse set of skills in order to successfully manage cultural diversity in the supply chain. It is important for the manager to understand the different approaches in education, training and information-resource gathering. Training supply chain managers to develop a world-class mindset, with a broad perspective and an approach of customization for each different situation is seen as a very effective diversity management strategy.

Negotiation in the Global Supply chain

The main goal of supply chain management is to increase efficiency and in the end profits throughout the whole of the supply chain. An important aspect of this is the negotiation during the purchasing process of the company. This covers the period of the first communication between the supplier and purchasing buyer until the final signing of the contract (Murray, 2016). When a company has to negotiate with a foreign supplier, cultural differences can obstruct negotiations in several ways (Salacuse, 1999):

1. Misunderstandings in words: When negotiating, words can mean something different in every culture. While a remark like ‘it’s difficult’ might mean that the door is still open for suggestions for an American, for a Japanese person it means no. The reason for this is the fact that most Asian cultures often are reluctant to say no during negotiations.
2. Misunderstandings in actions: Difficulties can also arise due to the actions that are taken in a negotiation. Westerners expect an immediate answer when they ask a question and when a silence occurs in a negotiation, they might see this as rude, lack of understanding or a negotiation tactic. However, Japanese people see periods of silence as normal and use this time to reflect and think.
3. Cultural requirements of the deal: Sometimes, cultural guidelines for people might hinder the negotiation of a deal. In some Muslim countries for example, people are prohibited to accept certain charges. Therefore they should be altered by name in the contract. Such as renaming financial charges as ‘administrative fees.
4. Negotiation styles: Every culture has its own negotiation style and lack of understanding of these styles can cause serious damage to the negotiation process. To clarify the main differences in negotiation styles, scholars have identified ten factors the different cultures might want to get out of the negotiations (Salacuse, 1999):

• Goal: Contract or Relationship
• Attitude: Win/Lose or Win/Win
• Personal Style: Informal or Formal
• Communication: Direct or Indirect
• Time Sensitivity: High or Low
• Emotionalism: High or Low
• Agreement form: Specific or General
• Agreement Building: Bottom up or Top Down
• Team Organization: One Leader or Consensus
• Risk Taking: High or Low

So how do you overcome these cultural differences during negotiations? There are three rules set out to cope with culture: Learning the other side’s culture, Don’t Stereotype and Find a way to bridge the culture gap.

It is of great importance for any business person involved in international business dealings to have knowledge about the other side’s culture. The degree to which this knowledge needs to extend differs for each situation depending on how important or how frequent the negotiation are. When a company plans to merge with a foreign company, the negotiator should have extensive knowledge about the other side’s culture, but if it’s about a one-time purchasing deal with a foreign supplier, only basic knowledge is required.

However, it might be even more important not to be overly reliant on this knowledge. When a negotiator enters a negotiation fully relying on that knowledge, there is a risk that he will allow cultural stereotypes to determine his actions. The other side will be offended if they feel that they are not treated as an individual but as a ‘cultural robot’ (Salacuse, 1999).

Negotiators tend to look at culture from a certain perspective during negotiations. As an obstacle that needs to be overcome, as a weapon to be used to impose their own will upon the other party by forcing to negotiate on their conditions, or as a fortress to defend themselves against those weapons. This is not helpful however, negotiators should try to find a way to bridge those gaps between the different views on culture. There are four ways of bridging these gaps (Salacuse, 1999):

1. Using the other side’s culture, trying to make a connection with the other side’s culture, creating some sort of bond. This can be done by identifying yourself with the other culture, showing a link you have made in the past.
2. Using your own culture, introducing the other side to your own culture. This has been done by inviting foreign partners to participate in local training programs.
3. With a combination of both cultures, trying to blend the most important elements of both cultures into one whole allowing business to be done effectively. This method is sometimes executed by a mediator or third person.
4. Using a third culture. When a negotiator finds he has some interests from a different country than their country of origin in common with the other side, E.g. French culture, this can be used during negotiations to bridge the gap creating a strong bond.

References

Cross, B., & Bonin, J. (2010). How to manage risk in a global supply chain. Ivey Business Journal, 2010(November/December). Opgehaald van http://iveybusinessjournal.com/publication/how-to-manage-risk-in-a-global-supply-chain/

Godiwalla, Y. H., & Bronson, J. W. (2015, June 17). Diversity Management in International Supply Chains: Strategies for Effectiveness. American Journal of Industrial and Business Management, 2015(5), 366-375. Opgehaald van file.scirp.org/pdf/AJIBM_2015061714261602.pdf

Hornbrook, S. A., & Yeow, P. M. (2004). Identifiable Dimensions to Effective Global Supply Chains: The Role Of Culture. University of Kent, Kent Business School, United Kingdom.

Hudson, S. (2005, Apr 26). Supply Chain Resource Cooperative. Opgehaald van NC State University: https://scm.ncsu.edu/scm-articles/article/cultural-affects-on-the-global-supply-chain

Mor Barak, M. E. (2010). Diversity Management: Paradigms, Rationale, and Key Elements. In M. E. Mor Barak, Managing Diversity: Towards a Globally Inclusive Workplace (pp. 234-248). SAGE.

Murray, M. (2016, Feb 5). Negotiation In The Purchasing Process. About Money. Opgehaald van http://logistics.about.com/od/tacticalsupplychain/a/Negotiations.htm

Robinson, A. (2015, Jan 23). Cerasis. Opgehaald van Cerasis: http://cerasis.com/2015/01/23/history-of-supply-chain-management/

Salacuse, J. W. (1999). Group Decision and Negotiation. Tufts University, The FLetcher School of Law and Diplomacy. Medford, USA: Kluwer Academic Publishers.

SCMO Supply Chain Advisors. (2014, Oct 17). Opgehaald van SCMO: http://www.scmo.net/news_letters/different-approaches-to-culture-and-cross-cultural-management/

van de Hoeven, M., & Lofvers, M. (2009). Canon van de Supply Chain (9): de Gouden Eeuw. In M. van de Hoeven, & M. Lofvers, Canon van de Supply Chain (pp. 46-48). Netherlands: Bohn Stafleu van Loghum.