A poll jointly conducted in June 2022 by market research organization, Ti Insight, and the Foundation for Future Supply Chain (FFSC) has revealed that an overwhelming majority of the senior logistics and supply chain executives surveyed believe that a major transformation of supply chains is under way.
Just 18% of 129 executives agreed with the statement ‘globalization in its present form is here to stay’ whilst over a third (36%) agreed that ‘Security tensions between China/Russia and US/Europe will lead to new supply chain hegemonies based on ‘ally-sourcing’. Nearly half (46%) thought that ‘Supply chains will become substantially more fragmented and localized as a result of protectionism, risk, costs and re-shoring’.
Which statement reflects your view on the evolution of global supply chains most closely?
Source: Ti/Foundation for Future Supply Chain
The poll was designed to take the temperature of the industry at a time of massive political instability caused by the crisis in Ukraine, increasing tensions between the West and China and, of course, the socio-economic consequences of Covid which have propelled shipping rates upwards and caused chaos at European and North American ports.
It seems that the largest constituent of respondents believes that the most likely scenario will be a regression to an era of tariffs, border controls and national industrial strategies to protect local markets. At the height of Covid, many countries placed bans on the exports of products such as medicines and personal protective equipment (PPE). Since the onset of the energy and food crisis caused by Russia’s invasion of Ukraine, there have also been bans on the export of grain crops and the subsidy of heavy industry. In times of stress and mistrust it seems countries fall back on protectionist policies, even though these are often counterproductive.
However, a sizeable proportion of those taking the survey believed that rather than fragmentation, supply chains would coalesce around competing world powers with a bifurcation between the West and China. The race to build out semiconductor capacity, the aspiration to develop high tech and communications production capacity as well as the imperative to control the supply of critical minerals are manifestations of this strategy. Through its Belt and Road Initiative, China has stolen a march on the rest of the world and the Europe and US are only just waking up to the threat to supply chain security which this represents.
According to John Manners-Bell, Director of the Foundation for Future Supply Chain, the poll shows the effects which the political and economic turmoil is having on the supply chain and logistics industry. ‘Just a few years ago it would have been unimaginable to challenge the premise of globalization. The experience of Covid and the rapidly deteriorating geo-political environment has led many in the industry to envision new supply chain structures. In purely economic terms these may be sub-optimal. However, our poll shows the growing importance of geo-political and other systemic risks which are now determining a transformation of attitudes.’
For more information on the geo-political risks impacting the global logistics and supply chain industry, download the recent whitepaper ‘Ally sourcing will drive a supply chain transformation’ published by Ti Insight and the Foundation for Future Supply Chain.
Source: Transport Intelligence, 26th July 2022
Author: Transport Intelligence
Whitepaper: What is Ally Sourcing & How is it Driving Supply Chain Transformation?
Examines the global supply chains which evolve around political allegiances. The paper also looks at recent and emerging alliances which are disrupting existing supply chain models.