What will the next era of globalisation look like? And, will it push companies to build resilient localised supply chains?
Rana Forhoohar, a columnist at the financial times, argues otherwise by looking at this fascinating question through the lens of the food, textiles, and technology industries suggesting many global supply chains have become fragile due to monopoly! The last 50 years of globalisation has been driven by three things: cheap capital, cheap energy, and cheap labour. They are all ending: Further, customer loyalty is no longer a given! Since the COVID-19 pandemic, 77 percent of US consumers changed stores, brands, or the way they shop. Much of that change was driven by necessity and lack of availability.
If we expand on Forhoohar's argument further, the widespread supply chain disruptions, global political and environmental disruptions, and extreme changes in the workplace over the last two years emphasised the need for operations leaders to be agile and responsive on many fronts. Therefore, future supply chains will need to be much more dynamic, and be able to foresee, prepare, and react to rapidly evolving demand and a constantly changing product and channel mix.
If we look back, for many decades, companies were moving their supply chain operations to Asia to cut costs but have since realised that nearshoring can help to transform their supply chains positively. According to Kearney's 2021 Reshoring Index, 79% of U.S. executives who have manufacturing operations in China have either already moved part of their operations to the United States or plan to do so in the next three years.
While localisation of supply chains has the potential to increase manufacturing costs and consumer prices, it does offer some wider-reaching benefits such as increasing employment opportunities, innovation, shortened supply chains, tighter control over suppliers and improved product quality and customer satisfaction. On the contrary, nearshoring operations have also led to new challenges, with labour shortages being one example. However, eventually, as Forhoohar points out more localised economies could provide more resilience, more sustainability, and less inequality!
Naveen Maram
Driven to inspire the next-gen.
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