After years of growth global supply chains have not just stopped growing but are actually shrinking In the 90s, a booming time for globalisation, the idea that global supply chains had become flat was considered gospel but in recent years the tide is beginning to turn.

Baker Mackenzie an American consultancy interviewed 600 Asia based TNCs and found nearly half are considering major changes to their supply chain. A tenth are considering a complete overhaul. One reoccurring theme is a change in the role china plays in the global market.

It is now clear that long international supply chains making goods cheaper is not without its disadvantages.  Most TNCs do not know their supplier’s suppliers which is a situation that is hardly secure considering they could be held hostage if a supplier fails to meet its obligations

Shocks to supply chains can come in a variety of shapes and sizes. Following the Japanese tsunami in 2011, a global semiconductor tried to map its vulnerabilities to 3rd and 4th tier suppliers. It took a team o 100 executives over a year to work out who was in their extended murky supply chain.

Secondly what is clear is that global trade consist not just of goods but services as well, call centres in India for example. Services create a third of value going into manufactured goods and services are growing 60% faster than manufactured goods. As services are usually best carried out closer to consumers, it’s possible in the future many firms will be more likely to source closer to home.

Thirdly we have seen that a stretched supply chain is vulnerable to political uncertainty and economic sanctions. More recently the rise of populism has disrupted global supply chains for example many firms are threatening to pull of out of Britain in the wake of Brexit. Globalisation is not going down without a fight. The Charted Institute of Procurement and Supply indicated that 1/5 of continental businesses would demand a substantial discount for even a one day delay at the border. A shocking 1/10 indicated they would cancel the contracts outright. In a fast paced consumer world, time is everything.

Meanwhile across the pond American firms have already experienced the bite of Trumps Tariffs. Despite the truce agreed with Mr. Xi, Trump’s tariffs have remained in place and Huweii’s future is uncertain. And in short a full blown trade war is not off the cards. Moody’s credit agency estimated such a conflagration, would cut real GDP growth in America 1.8% and reduce growth rates across Asia by 1% at least.  And in a globalised world it will be everyone who suffers economically. The OECD predicts a trade war would take 600 billion of global growth by 2021

A recent survey of European firms by Credit Suisse showed an increasing tendency to locate investments in Europe not outside Europe, despite the potential departure of the UK, one of its biggest markets. The findings stated that firms are no longer planning supply chains predominately based on cost. Apple has reportedly asked its suppliers to see how much it would cost to move 15% -30% of its manufacturing from China to South East Asia and India.

Previously technology enabled globalised supply chains but this time it may begin to localise them. It’s likely that to make up for the rapid change in supply chains that technology will be increasingly integrated into the way businesses plan, source, make and deliver.

AI, predictive analytics and robotics are already revolutionising businesses at every level and the general consensus is there is much more progress in the pipeline. Some may call those who dream of nearly 100% automated supply chain overly optimistic, but with rapid progress in new technologies and Moore’s law, it’s far from impossible. Whatever your stance on globalisation, for businesses, one thing is clear. If supply chains have to get shorter they’ll have to get faster and smarter as well.

Published by Millionaire Mindset

A student run blog focused on business, self improvement and productivity.

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