Photo by Nataliya Vaitkevich
With protectionist policies increasingly threatening free trade agreements and associated increases in taxes and tariffs, the globalisation of the last 20 years looks to be in reverse gear.
Thanks to Trump’s trade wars, new NAFTA and not forgetting the Brexit – yes, of course, I mean Brexit, we live in torrid political times. As global organisations face potential supply chain disruption on a range of fronts, we recently ran a survey amongst global manufacturers to take the pulse on what keeps them up at night.
One of the key questions centered on the impact of economic nationalism on manufacturing supply chains, relative to other forms of economic disruption – namely taxes and duties, economic impacts from natural disasters and environmental policies and initiatives. While 50% cited taxes and duties as their principal concern, at 46%, economic nationalism came a close second.
Of course, there is a direct correlation between economic nationalism and taxes and duties, however, increased tariffs are only part of the story. Increased rules of origin, regulatory requirements and border checks also add cost and complexity, which can quickly render manufacturing supply chains uneconomic.
At a regional level, 47% of European respondents believed that economic nationalism would impact their supply chains, followed by Asia and North America both at 46% and South America at 43%.
Within Europe, however, there were significant differences with just 35% of French respondents identifying economic nationalism as having the biggest potential impact on their supply chains, compared to 64% of UK respondents, with Germany falling between these two extremes at 43%.
With Brexit being one of the most startling examples of economic nationalism at play, it’s no surprise that British manufacturers view this as the most threatening form of supply chain disruption. Similarly, as President Trump continues to dig in behind his ‘America First’ campaign, 65% of Chinese respondents cited taxes and duties as their top concern.
On the Brexit question, the survey revealed that about half of decision makers globally (45%) are likely to change their supply chain design as a direct result of Brexit, especially in Europe (54%) and North America (51%) compared to Asia (39%) and South America (25%). Interestingly, despite the same number of respondents in China and Japan, results from Asia on this (and many other questions) were heavily weighted towards China, with 55% of Chinese respondents said that they would be likely to change their supply chain design because of Brexit, compared to just 22% in Japanese organisations.
The survey also explored the role of supply chain software in safeguarding supply chains, with 84% agreeing that this was important in protecting their organisation’s supply chain operations against disruption. Identified barriers to protecting supply chains against economic disruption included a lack of globalised data, inability to risk test changes before enacting, lack of supply chain data analytics, inadequate scenario planning capabilities and poor supply chain visibility.
It’s clear that manufacturers worldwide perceive economic factors as a major source of potential supply chain disruption and that technology plays a key role in protecting against this. In the context of unprecedented economic uncertainty, the ability to plan with confidence for a wide range of eventualities is a major advantage.
Note: The author Don Brenchley is Director of Industry Strategy EMEA at LLamasoft
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