As Global Trade Routes Shift, the World Notices Transformative Trends
One by one, insights I have been talking about for years are coming true. And the rest of the supply chain community is catching on.
No, I’m not talking about my prediction that the Kansas City Chiefs would win the Super Bowl. (Well, maybe I am … just a little.) Obviously, I haven’t been right on everything – we’ll detail a few mistakes later in this blog.
But it’s gratifying that others, from supply chain media to big banks, are catching on to a number of my previous supply chain leadership insights.
- Disruption is the new normal.
- Visibility is key to end-to-end supply chain functionality.
- Companies need to add sourcing with friends and allies (or at least in regions outside of geopolitical hot spots).
- Trade routes are changing across the globe as companies pursue optionality.
One major disagreement: The Citi report claims that global supply chains normalized in 2023. The researchers must not have paid enough attention to inflation, drought in the Panama Canal, violence blocking the Suez Canal, just to mention a few disruptions of
2023 that continue to this day.
Risk Mitigation – The Global Shift in Supply Chains
The Wall Street Journal recently reported on a massive, 65-page, 15-author white paper by Citi. The global banking behemoth brought up a lot of worldwide supply chain issues that I have commented on for years.
- Reshoring and nearshoring are happening on a large scale.
- Most big companies aim to cut their exposure to China.
- All eyes on India.
- New trade corridors are emerging.
Much of the Citi report verifies, with extensive data, the insights in my 45-page white paper. “The World Is Flat, Except When It Isn’t: The Yin and Yang of Globalization and Deglobalization” was released in October 2023. Let’s go through just a few points.
Reshoring, Friendshoring and Nearshoring Are Real – and Real Important
The Citi report discusses how Mexico, Vietnam and India are benefitting.
“The World Is Flat, Except When It Isn’t” goes beyond that, explaining how executive teams must consider the entire world their supply depot.
As I pointed out, the value of China’s natural resources ranks only sixth in the world, behind Russia, the United States, Saudi Arabia, Canada and Iran.
China is, however, far ahead of the world in securing access to natural resources. Even when, or especially when, the manufacturing giant must rely on other countries or regions.
Iron ore, refined copper and lithium are just three natural resources China imports from other countries.
Other countries and companies must step up their game.
As far as the rest of the world goes, those looking to nearshore, friendshore and reshore will have to examine the entire globe. Options include other Southeast Asian countries, Central and South America, Africa, Canada, even the European Union.
Beyond China Plus One to ABC
Yes, companies have been moving to a China Plus One model to add supply chain resilience. I pointed that out during speeches and webinars in 2020.
My white paper explained the hopes and difficulties that enterprises face when trying to deglobalize from China. They have to globalize elsewhere, often in areas without the infrastructure our profession has built around China-centric supply chains.
However, the world has moved beyond China Plus One. Since last year, a number of companies are looking at ABC – anywhere but China.
As I explained, companies are not picking up their supply chains wholesale and moving them to, say, Brazil. But they are trying to add supply chain resilience by sourcing future production and raw materials anywhere else.
All Eyes on India – And Its Supply Chain Problems
As Citi reported, many eyes are on India. I pointed out that India does have the best chance of replacing China as, if not THE factory of the world, a major factory of the world.
India is the globe’s most populous country, so the nation can be a market unto itself. It has significant mineral resources.
But headwinds remain. (Which, to be fair, the Citi report details.) India needs additional infrastructure and services: more transportation, logistics/supply chain and warehousing/distribution centers/fulfillment centers.
These are all initiatives that Tompkins Ventures and our Indian partners are working on. But India still suffers from low labor productivity and potentially slow, bureaucratic decision-making.
New Trade Corridors Point the Way to Success
Citi details growing trade between countries like Brazil, India, China, along with increased ties between the Middle East and Asia.
Fair points. But all that trade has to go somewhere, and the United States is still the globe’s largest consumer market.
However, the U.S. has problems with port capacity, efficiency and labor issues. My research details how the Dominican Republic is primed to become the Singapore of the West. Transforming the Caribbean island into a major supply chain hub rivaling any on the globe would reroute trade corridors across the Western Hemisphere.
Supply Chain Visibility, Independent Contractor Woes – Icing on the Cake
It’s not just Citi that’s catching on.
Supply Chain Management Review recently had a piece explaining, among other things, how logistics optionality and supplier optionality go a long way toward adding supply chain resiliency.
The article, “The 2024 Chief Supply Chain Officer (CSCO) agenda,” also talks about strategic sourcing with allies (friendshoring, nearshoring and reshoring), building win-win relationships and perpetual supply chain disruption.
And here’s The Wall Street Journal again. This story details how supply chain visibility startups are in demand in a world of perpetual disruption. I first started working on end-to-end supply chain visibility with my 2003 book No Boundaries. Here’s a 2021 IISE webinar that advanced this thought leadership.
And just to put the icing on the cake, last year I started writing about how warehouses that rely on independent contractors could face worker misclassification issues. Federal authorities just issued new regulations saying the same thing. To be fair, research from Chuck Moyer, president of Task4Pros, uncovered that issue.
Mistakes – I’ve Made a Few and Will Make More
The point is not that I get everything right. I don’t.
After all, I was a bit worried about my Super Bowl prediction at halftime Sunday. And, as detailed here, my haste in getting things done sometimes sends colleagues down rabbit holes they don’t need to chase.
One major issue? I find great solutions but sometimes apply them in similar circumstances without pondering the nuances.
So, the great solution does not solve the new problem. And often, it creates new problems. What works in the Tompkins Ventures Logistics Practice does not – surprise! – work well in the Tompkins Ventures Entrepreneurial Growth Practice.
Fueling the Fire: The Unwavering Drive to Educate and Elevate
I’ve made many other mistakes that I don’t want to talk about.
However, it’s a delight when others pick up on trends and insights that I have worked hard to educate people about. And it gives me the motivation to continue scouring the landscape for insights that can benefit supply chain leaders and executive teams everywhere.
Related Reading
- Supply Chain Success – THE Antidote to Societal Collapse
- How Supply Chains Can Help Us Survive “the Fall of Rome”
- Nearshoring Requires an Entirely New Ecosystem
- Employee Engagement: The ‘Experts’ Are Wrong Again
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.