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Improving supply chains in the Pacific Rim

A report by a team of USC Marshall School of Business MBA students has concluded that improvements in business supply chains – from improving communications infrastructure to simplifying documentation – could save Pacific Rim economies millions of dollars every year and dramatically improve trade.

The USC Marshall research team traveled to Hawaii in mid-November to present its findings to an advisory council of the Asia-Pacific Economic Cooperation (APEC), an organization focusing on promoting free trade and furthering economic growth among its 21 member nations spanning four continents. APEC is the world’s largest cooperative in a region that accounts for approximately 40 percent of the world’s population and nearly half of the world’s gross domestic product.

The team represented the only business school invited to share its findings with the APEC Business Advisory Council (ABAC), a collection of 63 business leaders from each APEC nation, who meet to advise the group on strategy.

According to MBA student Kevin Syslo, who led the team, the goal was to identify a series of chokepoints in supply chains and determine how addressing those chokepoints could have immediate effects on improving the ease of doing business among countries. The team conducted interviews with 181 APEC business executives, supply chain experts and government officials.

Among the key findings of the report:

• As a region, APEC is home to economies that lead the world in supply chain efficiency. However, it also has economies that lag world averages. Where supply chains cross multiple APEC economies, this becomes a collective concern.
• Emerging economies lagged developed economies most in transparency, availability and use of online information technology systems, efficiency of customs, and transportation and port infrastructure. Developed economies have benefited most from moving to information technology-based systems and improved customs efficiency. A lack of transparency and the presence of corruption burden emerging economies the most.

• Improvements in port operations and custom services offer an opportunity for immediate improvements. In emerging economies, improvements in both customs and port-clearance efficiency will save costs and time.
• Burdensome documentation requirements and complex regulations and standards puts small and mid-sized enterprises at a disadvantage.

“We found that relatively simple improvements in areas such as documentation and information technology could have the biggest impact,” said Syslo, who added that ABAC leaders have sent the USC Marshall report to trade ministers in their respective countries.

For Carl Voigt, professor of clinical management and organization at USC Marshall who served as faculty adviser for the research team, the recommendations provide ABAC with practical solutions to seemingly intractable problems.

“We know that enhancing roads and transportation will improve supply chains, but that is simply not possible in many emerging economies,” Voigt said. “Our goal was to answer fundamental questions: Where are the unnecessary inefficiencies? Where can the improvements be made? I believe that we have provided APEC leaders with some viable options for improving trade.”

Improving supply chains in the Pacific Rim

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