Supply Chain Risk Management in Cross-Border Trade: A Literature Review in the Context of the Durand Line ()
1. Introduction
Pakistan and Afghanistan share approximately 2640 kilometers (1640 miles) of border between the two nations called the Durand Line. The Durand Line was established in 1893 through an agreement between the British, India, and Afghanistan. It was envisioned to delineate spheres of influence, but it has been a source of contention since its inception. At that time in the late 19th century, British India was anxious about USSR expansion into central Asia, known as the “great game.” Therefore, to secure the northwestern frontier, the British sought to establish a clear boundary between British India and Afghanistan. Later, the line created a significant conflict and confrontation because of the division of Pashtun tribes into two separate nations, which disrupted their traditional social structure. Afghanistan has historically claimed the Pashtun areas within Pakistan, arguing that the Durand line was a product of colonial imposition. This claim still remains by the Afghan previous government and the existing Taliban regime, which contributed to strained relations between Pakistan and Afghanistan. The famous local quote (laar ow barr yo afghan) in Pashto is still on the rise, which means “East and West is one Afghan,” and you will hear it widely having any protests or peaceful rallies in the region. In total, there are eight crossings, but three are the main gateways between the two nations. All of the passes are closed often for every type of vehicle which has a significant impact on the supply chain disruptions.
This border is a dangerous region that has historically faced significant challenges due to ongoing conflict, political instability, security threats, and the rise of the Taliban recently further intricate the relations between the two neighboring nations. This unstable environment poses substantial risks to supply chains operating in and around the area, affecting trade not just between Pakistan and Afghanistan but beyond the whole region of central Asia. The complexities of managing supply chains in this context require specialized strategies to ensure resilience and continuity. Different organizations operating along the Pak-Afghan border encounter a unique set of challenges, including the threat of violence from insurgent groups, unpredictable regulatory changes, and insufficient infrastructure. These influences can lead to disruptions in transportation, delays in the delivery of goods, and augmented operational costs.
Effective supply chain risk management (SCRM) is vital for navigating these challenges. Companies must assume proactive methods to categorize probable risks and implement strategies that can alleviate them. The key strategies may include diversifying supply sources to lessen dependency, establishing partnerships with local stakeholders to boost operational knowledge, consuming technology for real-time tracking and communication, and developing comprehensive contingency tactics to respond swiftly to disruptions. This paper aims to inspect the specific SCRM strategies applicable to the Pak-Afghan border context. By examining case studies and present practices, it will provide insights into how organizations can enhance their resilience in this challenging environment. Eventually, understanding and implementing effective SCRM strategies in the Pak-Afghan border region is vital not only for economic steadiness but also for fostering peace and cooperation in a historically fraught area. For the geographical understanding of the Durand Line, see the map in Figure 1 of the region between the two neighboring countries.
The historical geopolitical background highlights the need for structured methods for planning and instigating undoing strategies and emerging connected supply chain reconfiguration. It is important to identify that multinational enterprises (MNE) have always dealt with difficult environments, political tensions, and conflict zones (Dai et al., 2013). There are many issues around the world, the
Source: National Geographic Education.
Figure 1. Map of Durand line between Pakistan and Afghanistan.
same as Pak-Afghan border trade and supply disruption conflicts, but the Durand Line is very different and symbolizes the historical, political, and ethnic authenticities of the region.
Afghanistan is the second largest export market of Pakistani products, and both are major trading partners. The potential of bilateral trade is projected to be around US$5 billion per year, but the definite trade was estimated to be US$1.27 billion in 2017 (Ahmad, 2018). In a local survey, respondents reported that an average of two crossings in a year were for business and an average of four times were for personal reasons such as meeting their families and relatives. The survey further indicates that trade, medical treatment, and visiting their relatives were the three main reasons. Over 53% reported having close relatives living in Pakistan. These acquaintances generate business opportunities and facilitate cross-border movement through the provision of accommodation and other forms of support (Malouta & Attai, 2020). The novelty of our contribution to the associated discourse is the perspective that addresses the overall challenges, opportunities, and contributions in supply chain management and conflict resolution. For instance, the full extent of the complex connections of supply chains, networks, and relationships that touch conflict zone geographies must be considered, predominantly those that are incompatible with the firm’s values and aims, including those of their stakeholders (Narula, 2019). It is to be noted that understanding such issues is always crucial for developing effective supply chain management practices, and the following sections will systematically explore the various dimensions of risk identified in the literature.
2. Literature Review
The literature on supply chain risk management in conflict zones, particularly along the Pakistan-Afghanistan border, is relatively limited but rising. This review synthesizes key themes and findings from current research to provide a comprehensive understanding of the challenges and strategies related to supply chain risks in this complex environment. Various studies define supply chain risks as disruptions that can arise from political instability, security threats, and infrastructural inadequacies. In conflict zones, these risks are worsened by violence, regulatory uncertainties, and humanitarian crises (Wagner & Bode, 2006). We know that the security situation and terrorism are the foremost issues in Afghanistan, but the trade and supply chain disruption between the two bordering nations is because of the historical issue of the Durand Line. The Durand Line demarcation, completed between 1893 and 1896 (Omrani, 2009), was not accepted by the King of Afghanistan named Zahir Shah. The sustaining argument by Kabul is that the agreement with the British on the Durand Line expired after 100 years (Wagner & Khan, 2013). On the other side, Pakistan regards itself as the successor of the British Empire and claims that the Durand Line had no deadline as claimed by Kabul. The border region is home to diverse ethnic groups, principally Pashtuns, whose cultural ties transcend national boundaries. This demographic reality confounds governance and security, impacting supply chain operations (Flynn, 2010).
The economic implications of supply chain disruptions in conflict zones are profound, affecting not only businesses but also local economies. Research highlights how these disruptions can lead to job losses, reduce economic activity, and increase poverty levels (Schoenherr & Swink, 2012). Risk management contexts, such as those proposed by Jüttner et al. (2003), emphasize the need for a proactive approach to identify, assess, and alleviate risks. These frameworks have been adapted to reflect the unique challenges of conflict zones. Supply chain risk management is a systematic and phased approach for identifying, evaluating, ranking, mitigating, and monitoring potential disruptions in supply chains (Aqlan & Lam, 2016). Ambiguity and risk have been used interchangeably in SCM. Risk comes from uncertainty, which has a few possibilities (Hubbard, 2020). SCRM can be alienated into two broad categories of approaches. The first is the approach for comprehensive risk management (Azad et al., 2012), and the second is a focused approach to precise disruptions. These specific disruptions could be security or terrorism events (Véronneau & Roy, 2014).
2.1. Risk Disruption
Supply chain disruption is an unpredicted measure or circumstance that interrupts the normal stream of goods, services, or information within a supply chain. Moreover, the disruptive measures are characterized by their type, intensity, duration, and influence (Dolgui et al., 2020). An indeterminate business environment between Pakistan and Afghanistan causes supply chain risks. The ambiguous business environment results from cyclical business behavior, variation in demands, or a disaster (Tang & Nurmaya, 2011). Some authors have categorized risks in supply chains under operational risk, network risk, and external risks (Handfield et al., 2008). Operational risks are due to a deliberate re-engineering failure ascending from within the system. For example, the insufficient customs processes at border passages of Turkham and Ghulam Khan Points lead to momentous delays in the movement of goods. Network risks arise from the interconnectivity within a supply chain network. In this precise type of supply chain risk, the nature of its complexity is unclear. The more complex the network, the harder it is to predict and mitigate. For example, the Durand Line is among the most complex borders between the two nations and is frequently closed because the geopolitical tensions can lead to substantial supply chain disruptions. Thirdly, external risks in supply chain disruptions stem from factors outside organizations control, which pose a significant threat to the existing business environment. For example, international sanctions on the current Taliban government have limited access to the Afghan market, affecting supply chain dynamics.
2.2. Risk Management
Risk management is the procedure of understanding, analyzing, and responding to risk factors that may affect the success of an organization (Hopkin, 2018). Additionally, risk management can also be referred to as a synchronized set of actions and approaches to direct an organization to minimize the risk for accomplishing the organizational goals. It is very hard to understand some of the risks connected to supply chain disruptions. The gateways on the Durand Line between Pakistan and Afghanistan have been highly affected for years because of the political instability, the issue of the Durand Line, and security threats. Companies around the world are progressively adopting scenario planning as a tool to prepare for potential geopolitical disruptions. According to Han & Dong (2015), spreading supply chains across different regions can alleviate the impact of geopolitical risks by reducing dependency on any single market, but for the Taliban, it’s quite challenging to look for an alternative market because of the strange relations with the neighboring countries and international sanctions. To implement effective and smooth supply operations between Pakistan and Afghanistan through the Durand Line, a productive dialogue and consultations are the possible ways to avoid supply chain disruptions. Furthermore, the basic steps of risk management are also significant to understand and implement for smooth operations at the Pak-Afghan border. There are some key mechanisms of risk management that are extremely important to implement in any sector of business operations, including SCM. The components and descriptions of the mechanisms are shown in Table 1.
Table 1. Key components of risk management.
Components |
Description |
Risk Identification |
The first step involves recognizing potential risks that could unpleasantly affect an organization’s purposes. This can comprise both external and internal risks. |
Risk Assessment |
Once identified, risks are analyzed to determine their likelihood and potential impact. This process often involves qualitative and quantitative methods to prioritize risks based on their severity. |
Risk Mitigation |
This involves developing strategies to minimize or eliminate risks. Common strategies include avoiding the risk, reducing its impact, transferring it to another party (e.g., through insurance), or accepting it if it falls within acceptable limits. |
Monitoring and Review |
Continuous monitoring of the risk environment and the effectiveness of risk management strategies is crucial. This step ensures that new risks are identified, and existing strategies remain effective. |
Communication & Reporting |
Effective communication of risks and risk management strategies to stakeholders is vital for fostering a culture of risk awareness within the organization. |
Source: Designed by author.
Risk management is a serious process that helps organizations navigate suspicions and make informed decisions. By methodically identifying, assessing, and mitigating risks, businesses can enhance their resilience and achieve their strategic objectives. The valuation of risk can lead to better risk management, reduce the extent of damage, and improve supply chain resilience. Long-term investment in a robust supply chain network in an organization will improve efficiency, reduce cost, and enhance customer satisfaction, which typically leads to higher revenues and profitability. Eventuality to disruptions makes businesses resilient and delivers a competitive advantage (Sheffi & Rice, 2005).
2.3. Risk Mitigation Strategies
Effective risk detection and mitigation approaches are essential for confirming smooth operations in this dangerous region between Pakistan and Afghanistan. Supply chain disruptions are challenging to manage but can be estimated through sensible risk assessment strategies (Kleindorfer & Saad, 2005). There are different approaches to the use of detection and to managing risks, but the use of ISO 31000 is one of the advanced designed methods to identify, analyze, and prioritize risks. ISO 31000 is an internationally recognized standard for risk management that provides guidelines and principles to help organizations effectively manage risks in a structured and consistent manner. There are numerous benefits of this approach, including increasing resilience and cost-effectiveness compared to many other methods.
Moreover, the strategies to control supply chain disruption risk may be divided into seven categories: prevention, rescheduling, conjecture, numerical and economic, vertical integration, risk sharing, and technology and security (Jüttner, 2010). To effectively manage the risk of supply chain disruption at Durand Line, both the government and stakeholders should effectively implement prevention strategies that mitigate potential disruptions before they occur. It is highly recommended to implement advanced technologies such as IoT, AI, and block chain for enhanced visibility and tracking of goods throughout the supply chain. Divestiture of resources, delay of entry, or contributing to less vague markets in deterrence (Miller et al., 1996). Supply chain resources are influenced to maximize the competitive improvement in serving the customers (Perry, 1991). Financial risks must be addressed through numerical and economic methods (Heal, 1998). Ensuring elasticity and delay in spending refers to rescheduling (Bucklin, 1965). Technological innovation and deployment from both sides of the Pak-Afghan will have a noteworthy influence to avoid supply chain disruption risk. The key areas of technological enhancement are block chain, artificial intelligence, online training, and digital custom platform. To implement and develop these areas could mitigate some level of the risks and create a more efficient trading environment. Both Pakistan and Afghanistan are facing severe debt and inflation, which will have a positive impact on their business sectors while enhancing the logistics and supply chain management sectors. Further to mitigate trade dispute risks, both sides of the border will need an enhanced dialogue. This dialogue must form a joint trade committee to establish regular meetings between the representatives from both countries to discuss the ongoing issues.
The literature review is connected with the case and elucidated with the current condition of the specific location. The specific region has very limited literature, but in actual figures, the supply chain sector is severely affected, and a lack of professionalism on both sides is becoming the real cause of economic variability in both countries. Further, the paper examines the methodology section employed in conducting the literature review on supply chain risk management at the Durand line.
3. Methodology
This section summarizes the methodology and the approach that aims to thoroughly identify, analyze, and synthesize relevant research findings to deliver a wide-ranging understanding of the risks and management strategies in these frameworks.
3.1. Database Search
We instigated an assortment of academic databases to certify a broad and comprehensive search. These included Google Scholar, Scopus, and Web Science. Moreover, specific journals focusing on supply chain risk management, logistics, and regional studies were also reviewed. We obtained research papers using an influence of keywords such as supply chain risk management, conflict zones, and Durand Line trade disruptions. The research readings were published in peer-reviewed journals, and our next phase involved purifying these research papers based on inclusion measures. They must be published in English and be freely accessible using universities authorizations. This filtering course left us with the precise region and most pertinent papers for additional analysis. Further, the literature considered for this review primarily includes studies published mostly within the last 14 years, from 2010 to the recent year of 2024. This period was chosen to ensure that the findings and discussions are relevant to the contemporary context of SCM, particularly in light of recent geopolitical and social security changes.
3.2. Data Analysis
The main information was extracted from the selected articles, including authors, publication year, main outcomes, and notorious risks. The extraction data was examined using thematic analysis to identify communal themes and patterns related to supply chain risks and management approaches. This intricate coding of the data and categorizing it into foremost themes such as political and social security risks, economic and logistical challenges, and cross-border regulatory concerns. Each article was evaluated for quality based on criteria such as the thoroughness of the research design, relevance of outcomes, and the integrity of the publication passage. This assessment ensured that only extraordinary quality research contributed to the analysis. Furthermore, we can detect that faith, transparency, encryption, traceability, and endorsement are the top five belongings in the analyzed literature.
3.3. Research Gap
Gap analysis is critical constituent of the literature review on supply chain risk management at the Durand Line. It classifies areas where the existing body of research is missing or insufficient, thereby highlighting opportunities for upcoming studies. Some of the main gaps identified in the literature are:
The current literature comprises theoretical frameworks or case studies from further regions, with few empirical studies precisely focused on the Durand Line. This gap indicates a need for more data-driven research that inspects real-world circumstances and generates insights directly appropriate to the unique challenges at this border region.
The political instability is frequently mentioned as risk factor; there is limited research that that quantitatively assesses its importance for supply chain operations at the Durand Line. The understanding of how political dynamics affect supply chains could lead to more effective risk management strategies tailored to the volatile context.
While some research recommends risk mitigation strategies, there is a lack of consent or best practices precisely matched for the Pak-Afghan border. The research is required to appraise the effectiveness of numerous strategies and develop a set of couturier recommendations for stakeholders involved in supply chain management in this area.
This methodological outline delivers an organized method for understanding the intricacies of supply chain risk management at the Pakistan-Afghanistan border. By steadily studying and fusing the existing literature, this study aims to pay valuable insights and notify future research and practice in this significant region.
4. Discussion and Recommendations
The supply chain between Pakistan and Afghanistan is critical for economics firmness and trade in the region. However, this supply chain faces numerous risks, including political instability, security threats, infrastructure challenges, and regulatory intricacies. Effective risk management is essential to enhance pliability and ensure the smooth flow of goods and services. In discussion, some of the key concepts are highlighted that need to be worked on in the future. The region’s geopolitical landscape is marked by instability, which can lead to abrupt changes in trade policies, border closures, and violence. These factors create vagueness for supply chain operations. The poor infrastructure of transportation, including insufficient roads and border facilities, hampers timely conveyances and increases logistics costs. This is aggravated by corruption and inefficiencies at border crossings. The economic volatility, driven by currency fluctuations and reliance on foreign aid, affects demand and supply dynamics. It is highly important for the business community to navigate complex economic situations to maintain profitability. The inconsistent regulations and customs procedures between Pakistan and Afghanistan can lead to delays and amplified operational costs. Compliance with fluctuating laws adds to the intricacy of managing supply chains. Currently, the ongoing condition and conflict between both of the nation’s lead to humanitarian dislocation, affecting labor obtainability and local markets. This further complicates supply chain dynamics. The number of both documented and undocumented deportations of the Afghan national refugees is mentioned in Figure 2.
The total number of Afghan refugees is around 4 million in Pakistan. These refugees are facing deportation due to the new policy for immigrants inside Pakistan. According to the UNHCR, the documented deportation of the Afghan refugees is alarming and has their apprehensions. But the Pakistani government is under pressure due to the mounting terrorism incidents inside the country. This policy and deportation have a direct impact on the supply chain department because many of the documented immigrants were a part of the sector in different companies. Therefore, the risk of humanitarian displacement is facing the industry and is anticipated to be growing in the future.
Particular of the key and specific recommendations to enhance risk management and ensure flatter operations. Solidifying political and security collaborations is critical for vindicating risks associated with supply chain operations,
Source: UNHCR, 2022-24.
Figure 2. Deportation of Afghan refugees from Pakistan.
especially in regions like Pak-Afghan border, where instability and security threats are widespread. Spending on infrastructure development is crucial for augmenting supply chain efficiency and resilience. It is highly recommended to streamline regulatory procedures on both sides to harmonize customs guidelines and procedures, facilitating smoother cross-border trade. Also, to implement training programs for customs officials to expand efficiency and reduce corruption at border crossings. The implementation of technological innovation is also significant, and to utilize IoT and GPS technologies for real-time tracking of shipments and enabling quick responses to disruptions. To adopt black chain technology to improve transparency and traceability in the supply chain, fostering trust among stakeholders. Engagement and investing in local community development projects to build goodwill and support stability in the region are highly recommended. It is important because from both sides, the local community can communicate effortlessly and understand better because of the same language and cultural values. To establish Key Performance Indicators (KPIs) for monitoring supply chain performance and implement ongoing risk assessment for the identification of new and emerging risks as compulsory.
5. Conclusion
Effective supply chain risk management at the border of Pakistan and Afghanistan is central due to the region’s unique challenges, comprising political instability, security threats, and infrastructure limitations. A proactive approach that includes enhancing political and security collaborations, investing in infrastructure development, and adopting international cooperation is essential for mitigating risks. By prioritizing voluntary repatriation and community engagement, stakeholders can build resilience in the supply chain while certifying the rights and safety of affected populations. Applying technology solutions and streamlining regulatory processes will further enhance efficiency and approachability. Eventually, a comprehensive strategy that addresses both immediate risks and long-term sustainability will foster steadiness and economic growth in this vital trade corridor. The percentage of lower-class people is increasing, and almost half of the population in both countries is living below the poverty line. Trade enhancement and the smooth supply chain operations are highly important. The recent deportation of over 1.7 million Afghan refugees from Pakistan will have an effect on the labor shortage in supply chain sector. It will also have the consequences of conflict and dispute spike between the neighboring countries. The Customs and National Logistics Corporation (NLC) of Pakistan has a poor and lack of technological equipment to smoothly perform their duties. The scanning system at the gateway of Ghulam Khan Point is extremely terrible to process the goods without disruptions. The corruption and smuggling level is very high, which leads to a catastrophic impact on the economies of the both countries. The current Taliban government in Afghanistan lacks the profession to handle the supply chain and logistics operations smoothly, and the stakeholders are facing the risk of disruption frequently. According to the local grain businessman of Afghanistan quoted during a visit to one of the crossing points that, his business is facing a 3% deficit of his total investment because of the supply chain disruption at the border. Understanding and negotiations between the two parties always bring a solution to any complicated matter, especially in that particular region. It is highly recommended for the governments of both countries to bring the local people from both sides of the region and negotiate a peaceful trade agreement and to avoid further supply chain risk.