Improving Customs Transit Systems
In the Islamic Countries
15
1.4 Theoretical Background
1.4.1 The Importance of CTR in the Performance of Global Supply Chain
Supply chainmanagement and logistics play an important role in the economy in twomainways:
(1) logistics is the main cost in businesses, and because of that it impacts on and is impacted by
other economic activities of the private sector and (2) logistics support many transactions from
raw materials to end-user products. In order to understand the role of logistics from a system’
perspective, we need to take into account the case where goods would not arrive on time, at an
appropriate place, and in an appropriate condition. In such a case, customers would not buy
them, and all economic activities along the supply chain will suffer an economic loss and
eventual legal liabilities.
The supply chain is the networks of organizations, including governmental organization’s, trade,
legal and regulatory requirements, national and regional plans, and customs risk management,
through which materials, or goods move until the finished product arrives at the customers
(Figure 2). In such complex networks, the variations in delivery time and costs can have a big
impact on the performance of the last organizations inside the chain. Every trading company in
the supply chain network depends on the services and products of another company. Therefore,
the variability in time and costs can produce variability of orders, and variability of orders affect
the appearance of the Forrester effect, (also called the bullwhip effect) where orders sent to the
first organization in the chain on the supply side have a much larger variance than the changes
in orders at the last organization or end customer7 .
7 Forrester, J. W. (1997). Industrial Dynamics. Journal of the Operational Research Society, 48(10), 1037–1041.
doi:10.1057/palgrave.jors.2600946