I recently established a new video series to address some of the many questions that come to me over the course of the week. I take a look at the questions that arrive and choose one or two a week that might provide some useful insight.
One visitor asked “what’s the future of globalization? How will trade patterns and supply chains change as a result of what’s happened in the last year?” Here’s what I filmed in the virtual broadcast studio yesterday.
Here’s what we know:
- it’s pretty clear that supply chains are broken: any discussion today is all about resilience, backup, multiple sourcing. Some companies have strategies in place that provide for triple or quadruple sourcing for product
- Covid-19 didn’t just break them – it highlighted what was wrong with them – in that companies and nations did not build any sort of resilience into their global supply chains
- fast trends highlighted this weakness: as the world rushed to online shopping, companies that were exposed were quickly exposed!
- it has weaponized global trade: we saw this early on as nations locked down supplies with PPE, and we are seeing it now in real-time as countries block vaccine exports. This is a new fast trend with major implications
- governments are finding new barriers: the pandemic provided a convenient opportunity to revive talk and action around protectionism
- trust has been eroded: the impact of all of this is that global trust has broken down on a massive scale
- damage must be fixed: expect this issue to be the focus of much corporate and global organizational discussion over years to come. G7 meetings will spend a lot of time on this issue, and companies will revise global trade contracts to better protect themselves
- localization accelerates: countries and companies are obviously moving to produce locally when and where they can, but as I identify in the video, many have not addressed the skills and other issues that come with this
- and so global trade patterns are forever transformed: we aren’t going back to where we were – we are only going to where we will be!
It’s not as though supply chains and global trade were already being transformed. Protectionist moves and the impact of the 2008-09 downturn were already dominating the trend:
- global trade was already falling in 2019 due to global politics
- and it was already falling as a result of the economic downturn of 2009
- global supply chains ceased expanding after 2008!
- it then shrunk by 9.2% through 2020
This is all pretty obvious – so what does it mean? I had this to say in the video:
The ultimate impact of our post-Covid world is that it will amplify the weaknesses of those who were not already aligning to a fast future.
Think about that in the context of retailers who did not have an e-commerce strategy; they thought they had 10 years to prepare, but only had a matter of weeks. Companies that were talking about localization because of trends that were already underway pre-pandemic suddenly found their lack of action exposed.
The long-term impact?
Upheaval, resilience, skills issues, and more!
Take this quote and pin it to your wall!