Just when you were getting the hang of managing complex global supply chains, the world went and changed itself.
In a few short months, conversations about interdependent economies linked with flexible, agile, and resilient supply chain and logistics practices have shifted to nationalistic, protectionist-centered debates that could sideswipe business operations in the not too far away future.
Britain’s vote to leave the European Union (EU) last June, the US election last fall and anticipation about a string of important elections sweeping through EU will impact the supply chain, one way or another. It has already started.
Political conversations about dismantling existing trade and foreign policy agreements are boiling up. Talk about border taxes and penalties for not using homemade, in-country products could hit corporate wallets in a significant way. Changing immigration policies will affect the movement of people and where they can work or live for long periods of time, something could haunt companies with a large pool of global employees.
With this and more playing in the backdrop, experts warn that supply chain risks will increase this year. Now is the time, they say, to up your supply resiliency game.
“Amidst exchange and commodity volatility, currency hedging will remain vital, while contingency plans must be put in place to protect supply chains from foreseeable trade barriers. Re-shoring supply chains will be an increasingly attractive prospect in the months to come. But, these are uncertain times for supply chain managers and there is no quick fix for the months ahead,” said John Glen, a Chartered Institute of Procurement & Supply (CIPS) economist and director of the Centre for Customized Executive Development at The Cranfield School of Management, in a statement.
“It is more important than ever for supply chain managers to listen to their suppliers, develop closer relationships with them and to monitor any changes, so they can react quickly and ensure their supply chains remain resilient,” he added.
In their March 2017 Harvard Business Review article, Justin Rose, partner at Boston Consulting Group (BCG), and Martin Reeves, a BCG senior partner, also recommend that manufacturers:
- Map existing and future customer footprints against existing manufacturing and supply chain capabilities.
- Analyze the total costs of supply for each alternative location.
- Examine and rebuild parts of the supply chain that have weakened or atrophied, and strengthen weaknesses to reduce risk exposure.
- Be ready to manage trade policy shifts, fluctuating exchange rates and geopolitical instability.
It’s anyone guess how the trade and policy winds will blow these next few quarters and what the longer-term fallout or benefits will be. Be willing to move with the times is an initial step towards resiliency.