Events over the last twelve months have exposed the fragility of global supply chains. Combined with a drive to increase sustainability, supply chains will be put under ever greater scrutiny as a result.
Exponentially rising costs and delivery problems caused by geopolitical events, particularly Russia’s invasion of Ukraine but also China’s shutdown over Covid, have been the most significant supply chain disruptors over the last year. Evidence is emerging that the Ukraine conflict is causing organisations to reflect on the uncertainty of relying on supply chains from regions of potential conflict.
Relations between China and the US remain uncertain and could even deteriorate further. Increased global volatility and uncertainty will contribute to de-globalisation and potentially two increasingly separate spheres of influence. This will cause further focus on and re-assessment of supply chains.
Other factors continuing to drive increased supply chain scrutiny include sustainability and governance issues, rising labour costs, and the increased potential of automation.
The threat of trade sanctions between the UK and the EU persists as the Northern Ireland Protocol has yet to be resolved and the UK looks to remove EU law from its statute books. Both developments could potentially spark a further deterioration of the UK’s relationship with EU. Any such deterioration further threatens supply chains into the UK causing businesses based here to reassess their business models.
Add to off-shoring, on-shoring, and near-shoring, the latest buzzword – “friend-shoring”. Employers spooked by the turmoil to supply chains and geographical uncertainty who are not repatriating supply chains to their home country are looking for political allies in which to base their supply chains.
Many businesses looking to build greater organisational resilience in the face of the negative impact from breakdowns to their supply chains are building in slack to their business models, moving from “just in time” to “just in case”.