Global Supply Chains Face a Yin and Yang Situation
Welcome to the rollercoaster ride of the 21st century. Shifting global dynamics are forcing supply chain pros into twists, turns, ups, downs and a whole lot of angst.
That prompted me to write my latest white paper, “The World is Flat, Except When It Isn’t: The Yin and Yang of Globalization and Deglobalization.” Businesses keep looking for the new normal. They still cannot grasp that disruptions will sweep away any new normal.
Competitive advantage in the future will come via supply chains built with optionality in mind. Optionality that can survive the yin and yang of simultaneous globalization and deglobalization.
The Great Unraveling: Deglobalization in Action
Many say that decades of globalization have benefited living standards and the U.S. economy. The results from a recent poll I ran on LinkedIn agree. The vast majority say globalization has been extremely beneficial or somewhat beneficial.
Despite that, headlines over the last few years have proclaimed that globalization is dead.
So, are global markets entering an age of deglobalization? A time where international cooperation is declining? Well, yes and no.
Some deglobalization is happening right before our eyes. Companies are pulling out of war-torn areas like Russia and countries like China.
Sometimes they look at circumstances and leave by choice. If they don’t leave fast enough, companies can face targeted export restrictions. Tariffs, trade wars, restrictions and shooting wars are pushing businesses away, shifting global dynamics.
Beyond political instability and economic uncertainty, the desire for self-sufficiency plays a part. This is an impossible order for all national economies, whether the goods in question are semiconductors or food.
Still, companies are looking for safer, more stable environments. This requires moving away from troubled regions.
This shift is not just about survival. It’s about strategic planning and risk management.
Companies must reassess their global footprint. As executives, you must examine not just economic factors but political and social considerations. Look at the big picture.
Your supply chain redesign decisions will affect operations for years to come. Your supply chain will determine whether you can deliver through disruption while your competition cannot.
The Flip Side: Globalization Strikes Back
But a closer analysis reveals the world is not becoming more isolated. Globalization is striking back in other regions.
The U.S., Canada, the EU and other countries are not reshoring everything back home. Smart companies, as “The World is Flat, Except When It Isn’t” makes clear, deploy optionality as never before.
Optionality will require you to redesign your entire global network. This goes beyond moving final assembly to Vietnam or Brazil. Optionality involves multiple alternate sourcing, production, suppliers, logistics and transportation solutions.
Short-term and long-term economic growth requires looking at the entire globe. Economic growth in a globalized economy requires, well, globalization.
Companies cannot just pack up and go home. Instead, you must look for new opportunities, new markets and new regions to expand into. Turn your gaze to other areas.
This obviously will include Asia. But it should expand to South and Central America, the Caribbean, Africa – even options in North America and the European Union.
This is not just about finding new markets. It’s about diversification and growth, exploring untapped potential, breaking into emerging markets and capitalizing on new opportunities.
Thus the yin and yang of globalization and deglobalization. They are opposite but interconnected forces.
In the Chinese philosophical concept of yin and yang, existence is composed of interconnected dualities. Dualities like darkness and light, passive and active, feminine and masculine, etc., keep people, the Earth and the universe in “balance.”
As globalization rises in some regions, deglobalization falls in others, and vice versa.
The Balancing Act: Reshoring, Nearshoring, Friendshoring
So, what does this mean for your business? It means you need to be agile, adaptable and ready to pivot at a moment’s notice. You need to understand the global landscape and be prepared to navigate the complexities of both globalization and deglobalization.
It’s not an easy task, but with the right strategies and insights, businesses can thrive in this ever-changing environment. You can find the balance between expanding your global footprint and maintaining their local presence.
This balancing act requires careful planning and strategic thinking. It likely will include a mix of reshoring, nearshoring and friendshoring. You might have to take advantage of new, emerging logistics hubs.
Businesses need to stay ahead of the curve, using insight to anticipate changes in the global landscape. Then adjust their strategies accordingly.
The Future Is Here: Embracing Optionality
The world is flat, except when it isn’t. It’s a paradox that businesses need to embrace. The future abounds with both challenges and opportunities.
So, let’s embrace this paradox. Let’s celebrate the yin and yang of globalization and deglobalization. Because at the end of the day, this dynamic interplay makes our world of business an exciting place.
Whether you like it or not, we live in an era where globalization and deglobalization coexist. It’s a complex world out there, but with understanding and adaptability, businesses can navigate these turbulent waters successfully.
The yin and yang of globalization/deglobalization will result in even more disruption. And we already are in an age where disruption is the new normal. Prepare your company to thrive on this paradox.
Jim Tompkins, Chairman of Tompkins Ventures, is an international authority on designing and implementing end-to-end supply chains. Over five decades, he has designed countless industrial facilities and supply chain solutions, enhancing the growth of numerous companies. He previously built Tompkins International from a backyard startup into an international consulting and implementation firm. Jim earned his B.S., M.S. and Ph.D. in Industrial Engineering from Purdue University.