Global network connections
The connectivity of factories and the ability to contract across countries are key determinants of GVCs and the decisions firms make to buy and whether to do so domestically or internationally . Under such circumstances , poor connectivity can mean high costs , low speed and high uncertainty , and can increase the risk of exclusion from GVCs .
Thus , successful participation in GVCs requires not just efficient cross-border linkages , but also resilient and efficient domestic segments of supply chains . In addition to connectivity for the flow of goods , information and finance , the era of GVCs has also increased the demand for countries to co-operate more with each other , especially in trade . Some argue that connectivity has greatly increased the prospects of co-operation between countries , which in turn has facilitated trade and economic growth . It is not a coincidence that enhanced global connectivity and shrinking trade and transport costs has grown in tandem with a proliferation of regional and multilateral trade agreements .
Between 2010 and 2011 , three events had significant effects on global supply chains , which served to underscore some of the effects of global connectivity . The first was the eruption of the volcano Eyjafjallajökull in Iceland and the other two were the Japanese tsunami in 2011 and floods in Thailand the same year . The three
events caused major disruptions to supply chains across the world , affecting auto and electronics production in seemingly disparate locations across the globe . The events underscored the interconnectedness of supply chains across the world and the importance of investing in diversified connectivity links . Improvements in connectivity have enabled firms to enhance their supply chain efficiencies and to maintain very lean inventories . However , such reliance , especially in an era of global value chains , on a limited set of suppliers and the maintenance of centralised inventories , has exposed firms to increased risks from disruptions in their supply chains .
A disruption , even a short-lived one , in one location can have ramifications across the world . Understanding network resilience is increasingly important in any connectivity program or project . Disruptions can be experienced also with whole countries , especially landlocked ones that are dependent on one major trade route for access to overseas markets . There are many such countries , including Armenia , Bhutan , Malawi , Nepal and Uganda , where the risks associated with connectivity based on few options are quite high . When Uganda in 2008 experienced a few weeks of disruption to traffic flows along the route to the Port of Mombasa in Kenya , and Nepal in 2015 had a blockade of the border-crossing at Birgunj
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