Call it the Chinese conundrum.
For several years, geopolitics (“tariffs, export controls, investment blocks, visa limits”) has threatened the flow of goods the world receives from China.
That goes both ways. Recent U.S. actions have targeted exports of semiconductors – and the equipment used to make the most powerful chips.
All the more reason to apply my concept of optionality to your sourcing. Because the pressure will not abate. And China will become more problematic as a source of production and consumption in the next few years.
The concept of VUCA (Volatility, Uncertainty, Complexity, and Ambiguity) struck global supply chains even before the pandemic era, starting with tariffs and trade wars. The 12-week shutdown of the factory of the world in 2020 accelerated history into a world of perpetual Disruption, as detailed in my latest book Insightful Leadership: Surfing the Waves to Organizational Excellence.
VUCA Has Changed Assumed Certainty to Known Uncertainty
We have accelerated from a world where our estimates are 95% accurate to one where our estimates are 95% inaccurate, from assumed certainty to known uncertainty.
This acceleration means that if you have not already started diversifying your supply chains, you are already behind. Since then, 2021 and 2022 have brought little relief, with semiconductor shortages, labor shortages, political unrest and more continuing to upset our formerly finely tuned global supply chains.
Beyond that, the Uyghur Forced Labor Prevention Act recently took effect, adding compliance costs and more delays for goods produced in that region of China. China’s continued bellicosity threatening a potential military takeover of Taiwan has further rattled supply chains, particularly considering that Taiwan is the center of global semiconductor production.
That saber-rattling has led to U.S. moves to deny China access to the latest and most powerful chips, supercomputers and artificial intelligence technology. Semiconductor manufacturers and toolmakers will lose markets.
I have applauded U.S. moves to supercharge domestic semiconductor production. I also have pointed out numerous other regions (South America, Africa, ASEAN countries) leaders can examine to diversity their critical supply chains.
History – and a move to decouple supply chains heavily reliant on China – is accelerating. You also need to accelerate diversification to add resilience to your supply chains, as 2023 promises more of the same.
The Chinese conundrum demands no less.
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.