GOOD QUESTION: Is supply chain globalization in retreat? Why or why not?
Industry insiders reveal if there has been a pullback on supply chain globalization amidst volatility and disruption.
The answer is non-linear. With supply chain disruptions, emerging technologies, and rising labor costs in developing countries, more firms are considering regionalizing their supply chain. Execution is the hard part. The more complex one’s supply chain ecosystem, the harder it is to onshore.
Head of Global Banking
Yes and no. We’ve seen the rush of knee-jerk reactions to onshore more. But the longer-term norm will be to balance offshoring and onshoring as companies seek to meet their cost objectives yet learn to keep their supply chains agile to meet service-level commitments.
Supply chain globalization is an irreversible trend; nations rely on each other for goods and services. What’s new is the trend of low-cost country sourcing; companies are looking for nearshore options, which means they are focused on securing suppliers closer to their consumption point.
–Amit Gupta, Ph.D.
Chief Product Officer
It’s definitely hitting some speed bumps and in the long-term picture, there are elements that are going away. Chip manufacturers have shown it is not viable to have all manufacturing located with a few sources. And we are seeing that shipping being controlled in one direction is problematic both on the shipping and receiving sides. Ultimately manufacturing is going to pick up around the world but products like steel, chips, and other complex products will take time to come online.
Yes, to a degree. It is a process that will play out incrementally, over time. However, there are pressures to diminish some of these dependencies that weren’t there a few years ago, including reducing reliance on lengthy inbound transportation modes that are susceptible to price spikes and capacity constraints, and, of course, geopolitical risks.
Director, Supply Chain Solutions
The “retreat” is more an illusion than a reality. Globalization of the economy hasn’t stopped, so the supply chain can’t stop, i.e., just because the United States will make microchips, it doesn’t mean U.S. companies will stop buying from others, or that the United States will not sell to other countries.
President of Consumer Services
Montway Auto Transport
Globalization is not going away. It must combine with regionalization to enable supply chain flexibility. By understanding the impact of internal and external factors, supply chain stakeholders can evaluate constraints and make the decisions that create the most value for the enterprise.
–Patrick Van Hull
Senior Director, Product Marketing
No. But select businesses are seeing a tradeoff value in a simplified system with more control and visibility from end to end. Simplified systems offer ways to identify, assess, and manage risks such as inventory irregularity and unpredictable lead times.
Vice President & Supply Chain Lead
No. Today’s supply chain requires both a local and global source of supply. As a result, we have shifted from a low-cost to a results-driven approach, focused on driving better customer experience.
CPSM, CPM, VP Operations
Supply chains are becoming globalized and localized simultaneously. The perpetual search for cost savings resulted in global supply chains, and increasingly, automated manufacturing, higher transportation costs, and environmental concerns are now driving a shift toward localization.
Industry Thought Leader
It depends on location. Companies that globalized their operations 20 or 30 years ago when there were major cost benefits, are now dealing with rising labor and logistics costs in many locations. They’ll need to compare current globalized cost structures against the costs of onshoring to see if an advantage still exists.
Senior Director of Supply Chain Solutions
No. Shippers have had to be increasingly flexible in recent years, leading to a greater reliance on international partnerships. Because these partnerships can take years to form and shippers must make significant investments to mitigate the inherent risks, supply chain globalization is here to stay.
Director of Business Intelligence
Not at a meaningful scale. We may be in a moment of pause and tectonic shift, like tariffs growing, but globalization is a Pandora’s box that won’t close unless global economies shrink exponentially. Even with aggressive reshoring/nearshoring initiatives, it would take decades to displace China as the world’s manufacturer.
Many companies have added redundancies like nearshoring to minimize their supply chain risk. However, new supply chain technological innovations being developed around the world will continue to spur globalization.
VP, Supply Chain Solutions
Supply chain globalization is in reset, not retreat. Shippers are reassessing the fundamentals of their supply chain strategies. Whether their manufacturing is situated in the United States or abroad, shippers are looking to tighten their networks to build resilience and reassert control.
Yes and no. When the pandemic started, many columnists wrote that everyone will be doing local and regional sourcing. What happened? People stockpiled inventory. You can’t shift entire supply chains overnight. What many organizations are moving toward is multi-sourcing strategies to build resilience.
Director of Market Research for Procurement and External Workforce
No. While sentiment has shifted on globalization, networks are too vast to localize. Raw materials, research and development, and labor availability are critical to success and foreign governments will look to capitalize on these opportunities. The next black swan is unclear but it is clear that globalization is here to stay.
General Manager, Network Collaboration
Globalization is in transition. We are seeing companies evaluating different operating models and how these could be impacted by varied factors—tariffs, regulatory changes, geopolitics, etc. A shift to reorient supply chains from a globalized model would be significant and would require huge investments.
Product Strategy Leader
John Galt Solutions
No. It would be naive to suggest we’ve seen a complete pivot given the infrastructure that’s already in place and the economic benefits from globalization. Additionally, hopefully there will be a de-escalation in the current geopolitical turmoil and the broader positivity of globalization will persist.
President & COO
Transportation Insight & NTG
No. As supply chains adapt to market conditions, whether punitive trade barriers, geopolitical conflicts, weather events, or logistics shocks, trade flows will shift, but globalization always wins because economics always wins.
No. Drawing from the availability and economic value of worldwide supply sources will continue to have its advantages for the foreseeable future. Even with parts shortages and shipping challenges, a nationalized procurement strategy is futile for businesses and consumers alike. Companies that have migrated toward more vertical integration to mitigate potential supply shortages have found that outsourcing competencies for a specific expertise has prospective cost, quality, and just-in-time delivery advantages.
President & CEO
We are in the midst of a supply chain re-organization. Disruptive events push organizations to reconsider sourcing strategies against priorities and values. Organizations with agile processes will evaluate the landscape and optimize on these inputs.
Principal Solutions Consultant
Global trade markets will retreat because governments are taking protectionist measures against imports as they transition to market independence. This trend will have a negative impact on world trade growth as imports/exports decline and domestic manufacturing increases.
From a supply chain perspective, the United States will realize a decline in outsourcing of goods and intellectual property to China and other countries as geopolitical events unfold. Similarly, the EMEA markets will also have a more independent marketing practice going forward, being less dependent on outsourcing, including being more diversified on energy supply options.
–Gregory W. Tuthill
Chief Commercial Officer
Recent events have led companies to rethink supply chain globalization, but the real question is what should companies be doing to shift quickly no matter the disruption. By managing product and packaging specifications—instead of relying on suppliers to—companies can be prepared to face whatever comes their way.
Founder and CEO
No. Reshoring is a reality for some operations, but it’s not that supply chain globalization is in retreat—it’s a new phase of supply chain optimization to mitigate risks and delays. Whether reshoring or not, industrial leaders should tap into frontline activity data to increase their supply chain resiliency and efficiency.
No. The global supply chain will continue to move forward. The United States does not have the labor to fill these jobs nor does the American consumer wish to pay the higher prices. Market forces will continue to drive the interconnected and interdependent global supply chain, and that is a good thing for U.S. exporters who are reliant on their participation in the global supply chain as well.
President & CEO
TRADE TECH INC.
Yes and no. Though some reshoring is occurring, many companies are simply diversifying their supply chains by sourcing from countries other than China, such as India, Vietnam, or Mexico. In the long run, this may make supply chains more resilient but will also introduce new risks to contend with in these new sourcing locations.
Practice Director, Security and Resilience
Globalization may be in retreat, but it has not surrendered. Organizations need to consider longer-term cycles for the future; right now the world is going through a period of realism. This doesn’t rule out that there will not be a return to more liberalist principles where cooperation is encouraged to such an extent that global barriers to trade and infrastructure challenges are seen as transnational opportunities for cooperation and collaboration.
Chief Strategy & Innovation Officer
Supply chain globalization has never been in higher demand. When COVID-19 hit, the ports were backed up and the shelves were empty because of a lack of network visibility. Building a global supply chain network increases visibility, allowing for efficiency in movements worldwide.