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Supply Chains Need To Adjust Now To New Global Factors

Supply Chains Need to Adjust Now to New Global Factors

Supply Chains Need to Adjust Now to New Global Factors

The environment for supply chains has changed. Companies need to redesign their operations now to be trusted and reliable sources for their customers (Photo: Getty Images) Supply Chains Need to Adjust Now to New Global Factors Possible UPS Strike, Yellow Shutdown are the latest Supply Chain Challenges Procurement Costs Increase, But Top Performers See Increased Advantage The Fashion Supply Chain, by Design As EV production ramps up, semiconductor supply chain concerns grow More News Why Supply Chain Leaders Should Care About B2B Customer Service Automation In this webinar, you’ll find out why forward-thinking supply chain leaders are turning to customer service automation to create the conditions necessary to harmonize all the people, processes and technologies that work for and with a business and drive its success. All Resources For the past 30 years, business leaders have been able to operate their supply chains mostly unencumbered by geo-political constraints. Global economics was highly integrated and multilateral economic principles and agreements created efficiencies for companies, expanding the volume of global trade from $28.5 trillion to $32 trillion from 2021 to 2022. This unencumbered environment no longer exists. The freedom-of-action that resulted from an international commitment to trade liberalization has been greatly reduced, and in some cases eliminated. Because of this, many business leaders are worried about the impact these events and geopolitical factors will have on companies’ operations going forward. The world is at an inflection point over growing questions, and in some cases resistance, to globalization and economic interdependence. Concepts of supply chain sovereignty are rising and threaten a company’s ability to retain operating flexibility and competitive advantage. The changing global economy, impacted by rising geopolitical tensions, a shifting geoeconomic environment and climate change, is drastically altering the way international trade is conducted. Rise in deglobalization The sudden shockwaves felt because of the impacts of Covid-19 and Russia’s invasion of Ukraine have increased support of deglobalization. The fragility of supply chains that was highlighted during the pandemic, combined with a recent rise in both deglobalization and protectionist policies has created a distrust in international trade. Policies are beginning to reflect this change in mindset as well, pushing businesses to look domestically for their supply chain operations. The Biden Executive Order on Supply Chain Security states “more resilient supply chains are secure and diverse—facilitating greater domestic production, a range of supply, built-in redundancies, adequate stockpiles, safe and secure digital networks, and a world-class American manufacturing base and workforce.” Rise in protectionism Protectionist policies are on the rise, as shown by the U.S. and China trade war, the U.S. increasing tariffs on imports from the U.A.E., and Biden’s Executive Order 14017 that suggests reshoring critical supply chains, and places preference on U.S. based manufacturing for both partners and allies. The United States is not the only nation pushing these ideas. Earlier this year, Yasutoshi Nishimura, Japan’s Minister of Economy and Trade noted the G7 countries should take a coordinated approach to counteracting the economic coercion China has implemented against its trading partners. Countries viewpoints are shifting, as the Center for Strategic and International Studies noted, with many feeling that “interconnection with China (and in some instances, dependence) has become the primary source of geopolitical risk,” leading countries to move toward supply chain sovereignty. As countries implement protectionist policies, the general public’s support for both cooperation and trade with other countries declines, increasing the likelihood for protectionism in both locations. In addition, protectionism tends to increase as global trade slows as a defensive reaction to protect regional markets from rival economies, creating an environment that further promotes the implementation of protectionist policies. Climate change commitment The apparent economic effects of climate change are recasting companies’ focus on their operational resilience and creating a pervasive discussion about ESG (environment, social and governance) management models. Countries have begun to curb the negative effects of climate change through the implementation of new taxes and regulations. Thus, requiring companies to begin transforming the way they operate supply chains. The United States has recently passed the Inflation Reduction Act, which includes over $400 billion in green subsidies from which EU companies will be excluded unless they relocate to the United States. In addition, tax breaks will be given to those buying an electric car, but only if it was assembled in North America. Policies like this will be implemented across the globe. Not only will new policies like this be put into place, but as the Earth’s temperature increases, the severity of storms will increase, impacting trade routes […]

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Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

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