The restructuring of global supply chains is not a state, but rather a constant dynamic in which the global industries reshape their production networks. In 2020, the viral contagion of Covid-19 led to a massive disruption of production due to lockdowns, social distancing and other commuting restrictions.
These measures extensively challenged the supply chain structure, which relies on a limited number of key suppliers and functions with a just-in-time and efficiency-driven mindset. Resilience became a reliable solution to deal with the crisis for various supply chains ranging from agricultural to high-tech commodities.
The Economist is concerned that a security-led resilience might result in growing protectionism.
The article published in The Economist suggests that supply chain resilience shapes a new kind of globalisation, which focuses on security rather than efficiency. This focus is characterised by precautionary inventories and dual sourcing/long-term contracts with allies or regional suppliers. In the last quarter of 2021 and first quarter of 2022, this resilience strategy helped companies inch back to normal. The supply chain resilience index (a time series index measuring changes in supply chain risk by country across six categories: Economic, Environmental, Labour Practices, Legal and Governance, Resilience, and Safety and Security) reached 44,9 points for Quarter 4/2021.
However, The Economist is concerned that a security-led resilience might result in growing protectionism. The current supply chain shift to security induces that the “race to the bottom” reported by Mark Anner in Stopping the Race to the Bottom: Challenges for Workers’ Rights in Supply Chains in Asia among companies hunting for the lowest cost of productions has transformed to a search for places where the supply chain is the most secure, economically and politically.
Safe places can mean trouble too
In the current world, where the line between democracies and autocracies has moved again, the new hunt consists in looking for companies in a country friendly to the investors’ government or even an ally instead of “treat[ing] all firms equally, regardless of their nationality, and strik[ing] trade deals with democracies and autocracies alike.” The author reminds us that resilience derives from diversification. Reducing sourcing from autocracies should not mean re-shoring and concentrating at home, which would result in a massive rise in production costs.
While these concerns remain, significant challenges exacerbate the problems in supply chains. The resurgence of Covid-19, enduring geopolitical crisis in Ukraine and escalating tensions between China and Taiwan, global inflation and shrinking consumer spending in the U.S., among others, have doomed the expected rebound and disrupted the recovery impetus of global supply chains. In this challenging context, the supply chain resilience index has turned negative to 39,8 points in comparison with the positive signals of the previous quarters. The under-40 index indicates that supply chain resilience in general is low while supply chain risks are at a very high level.
Calling for a new supply chain normal
Considering the ongoing upheavals, a more open and longer-term supply chain resilience should be taken rather than the protectionist approach. According to some calling for a “new supply chain normal,” multiple sourcing from various suppliers in diverse regions and countries remains the top recommendation. Plus, procurement simplification for multiple suppliers shall be a cost-saving strategy as well, especially for high-volume orders. And finally, it is suggested that to reach end-to-end resilience, supply chain visibility and transparency must be ensured and real-time data shall help companies make better decisions.
License and Republishing
The Choice - Republishing rules
We publish under a Creative Commons license with the following characteristics Attribution/Sharealike.
- You may not make any changes to the articles published on our site, except for dates, locations (according to the news, if necessary), and your editorial policy. The content must be reproduced and represented by the licensee as published by The Choice, without any cuts, additions, insertions, reductions, alterations or any other modifications.If changes are planned in the text, they must be made in agreement with the author before publication.
- Please make sure to cite the authors of the articles, ideally at the beginning of your republication.
- It is mandatory to cite The Choice and include a link to its homepage or the URL of thearticle. Insertion of The Choice’s logo is highly recommended.
- The sale of our articles in a separate way, in their entirety or in extracts, is not allowed , but you can publish them on pages including advertisements.
- Please request permission before republishing any of the images or pictures contained in our articles. Some of them are not available for republishing without authorization and payment. Please check the terms available in the image caption. However, it is possible to remove images or pictures used by The Choice or replace them with your own.
- Systematic and/or complete republication of the articles and content available on The Choice is prohibited.
- Republishing The Choice articles on a site whose access is entirely available by payment or by subscription is prohibited.
- For websites where access to digital content is restricted by a paywall, republication of The Choice articles, in their entirety, must be on the open access portion of those sites.
- The Choice reserves the right to enter into separate written agreements for the republication of its articles, under the non-exclusive Creative Commons licenses and with the permission of the authors. Please contact The Choice if you are interested at contact@the-choice.org.
Individual cases
Extracts: It is recommended that after republishing the first few lines or a paragraph of an article, you indicate "The entire article is available on ESCP’s media, The Choice" with a link to the article.
Citations: Citations of articles written by authors from The Choice should include a link to the URL of the authors’ article.
Translations: Translations may be considered modifications under The Choice's Creative Commons license, therefore these are not permitted without the approval of the article's author.
Modifications: Modifications are not permitted under the Creative Commons license of The Choice. However, authors may be contacted for authorization, prior to any publication, where a modification is planned. Without express consent, The Choice is not bound by any changes made to its content when republished.
Authorized connections / copyright assignment forms: Their use is not necessary as long as the republishing rules of this article are respected.
Print: The Choice articles can be republished according to the rules mentioned above, without the need to include the view counter and links in a printed version.
If you choose this option, please send an image of the republished article to The Choice team so that the author can review it.
Podcasts and videos: Videos and podcasts whose copyrights belong to The Choice are also under a Creative Commons license. Therefore, the same republishing rules apply to them.
