Supply Chain Enabled

A move towards shorter supply chains?

Published: June 2, 2021
Author: Lorcan Sheehan

A move towards shorter supply chains?

We have all seen the product labels – product of Argentina, packed in Thailand and sold in the US or in Europe.   From a sustainability perspective, we know that this does not make sense.  At the same time, as organisations chase lower manufacturing and conversion costs, we have seen supply chains become more remote from the consumers that they serve.
Several attempts have been made politically and otherwise to return manufacturing to western economies.

While these have met with little success, there are a number of factors that may drive a rethink of supply chain networks in the short to medium term:
  • Pandemic shut downs have caused a rethink of critical healthcare supply chains and their performance, at both a company and a governmental level.  The US, in a 100-day review of such operations, highlighted proposals which looked at the pharmaceutical and EV in particular.
  • Capacity constraints on ocean shipments from China has led to freight prices increasing.  Instances of up to ten-fold increases have been seen.  At the same time, lead times on these lanes have increased significantly and service reliability has plummeted.
  • The blockage of traffic on the Suez Canal which arose from the grounding of the Evergreen in March 2021, highlighted the vulnerability of international traffic to delays on certain shipping lanes
  • International trade protectionism increases have created a level of tariff uncertainty in both price and in product availability
  • Proposed changes to international corporation tax structures may result in lower incentives to create complex, tax driven supply chain structures
  • There is an increase in consumer awareness of sustainability issues and the growing importance of a green agenda in key global economies.  This may have the impact of rewarding shorter and more local operations.

Supply chain teams are continually monitoring shifts in input costs, markets, lead times and availability.  While none of these factors alone will drive changes, the combination will certainly influence future manufacturing and supply chain footprints.

Let us know if you are already seeing impacts that are contributing towards such increased regionalisation.

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