Impact of International Policy changes on Supply Chain

Impact-of-International-Policy-changes-on-Supply-Chain

Policy and Supply Chain

Whether you lean red, blue, left, or right, the prize of influencing the future direction of manufacturing and international trade is tempting. Who wouldn’t want to bring back manufacturing, rebalance international trade, restore pride in domestically produced goods, or establish a leadership position in product innovation?

We have seen multiple efforts to influence global supply chains from tariffs to taxes and trade and while many have been disruptive, few have had the desired effect of significantly reshoring supply chain activity. So why do supply chains seem to stubbornly resist attempts to steer them in a particular direction? Even with the impact of a global pandemic and pledges from all sides to end reliance on extended supply chains, change on the ground appears to be slow.

Supply chains are in a continuous state of evolution. In an ‘anywhere world’ a core element of supply chain strategy revolves around strategic footprint decisions. Supply chain teams model the impact of relative labour, transportation, and input costs against lead time and capacity criteria. 

Here are 7 points to consider for policy makers of all persuasions that want to influence real change in this supply chain footprint.

  1. Supply chain networks not factories

Todays supply chains rely on a closely integrated network of suppliers with access to raw material sources, logistics networks, and specialist service providers to make them effective.   Change is possible but it is more like moving a city than moving an individual enterprise. 

  1. Infrastructure and connectivity

Access to underlying digital and physical logistics infrastructure is critical to the effective movement of information and products.   Supply chain teams will consider current needs and the ability to scale so clarity and commitment on future investment policy is as important.

  1. Access to markets

While physical supply chain infrastructure is highly mobile, the distribution of consumers with the financial ability to spend tends to shift more slowly.   Trade and logistics access to key markets is important and barriers or uncertainty around future access will discourage investment.

  1. Talent

One of the best kept secrets in supply chain is the wide variety of career options that exist with the plan, source, make, deliver, return, operate continuum.   Supply chain talent in the past has evolved more than planned but the talent needs of the future will require connect thinking and action between industry, academia and government.  

  1. Functional and industry targets

Many supply chain functions operate independent of manufacturing or distribution locations.   Targeting supply chain shared services and knowledge functions or specific industries can be more effective than a blanket land grab for manufacturing.  

  1. Tax

The notion of a tax efficient supply chain is not new, but a strategy based purely on tax changes can only succeed when the other supply chain elements are in place.   In a competitive global economy with increased international cooperation to combat tax avoidance, the ability to create sustaining advantage in this area is questionable.

  1. Stability and commitment

Supply chain decisions require medium term certainty that decisions will survive short term political policies and results.   Creating a consensus approach around key elements of industrial policy and that addresses known social and sustainability issues can go some way towards building confidence in that stability.

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