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Global supply chains power the world. Products that we purchase
start with raw materials processed through an often-complex global
supply chain until they reach the consumer. Regardless of how
brilliant the product design, engineering, and marketing, the
consumer will be disappointed if the supply chain is not able to
deliver that brilliant product in good condition when and where it
is needed. Managing this constant change is all in a day's work for
supply chain professionals, but success doesn't happen without
thoughtful planning. Understanding the potential risks in your
global supply chain requires knowledge of both industry changes as
well as macroeconomic, political, and social issues.
IHS Markit has partnered with CSCMP (The Council of Supply Chain
Management Professionals) and the University of
Tennessee, Knoxville's, Global Supply Chain Institute (GSCI) to
produce a tool that improves market intelligence, decision-making
and risk mitigation efforts for supply chain professionals. The
EPIC Global Supply Chain Readiness Index (EPIC) employs a
data-driven approach that combines University of Tennessee's
quantitative analysis with IHS Markit's rich on-the-ground
qualitative insights from 64 countries around the globe. This tool
is designed to provide foundational and contemporary input to
supply chain leaders to drive more informed decisions about how to
best operate in these markets.
Through the ongoing development of the field of supply chain
management, professionals have become more attuned to the
criticality of factors such as risk and readiness to a successfully
managed supply chain. This is no easy task as supply chain risks
for any company come from different areas and are becoming
increasingly complex as companies get larger and more vulnerable.
Common causes of risk are disruptions and delays due to increased
transportation cost, damage, unexpected returns or failure to sell,
inventory issues, network disruptions, and supplier issues,
including high cost or loss of supplier. In addition, broader
non-business-related disruptions can be caused by natural disasters
or geopolitical issues. Some of the major concerns highlighted by
shippers and carriers at the Council of Supply Chain Management
Professionals (CSCMP) 2019 EDGE conference were:
Brexit in the UK
Reliability and capability of small suppliers
The trade war between the US and China
Natural disasters and their impacts on coastal areas and supply
chains in general
International Maritime Organization (IMO) 2020 sulfur
regulation and oil cost increases in general
Labor shortages in the European Union
Of course, this list of concerns is not static and can vary
considerably by company and context. If your supply chain includes
France, then social unrest from pension reform or fallout from the
recently imposed digital services tax may be your issuedu jour. Brazil and India will likely struggle with
structural reforms creating additional uncertainty around
investments. Rising protests over social inequality and economic
austerity programs may impact supply chains across Latin America,
North Africa, and the Middle East. In Europe, Brexit may not cause
too much uncertainty in 2020 as the UK remains in the EU single
market in 2020; but longer-term may be an issue. Additionally, some
supply chain threats know no border.
What is clear is that we're living in a VUCA (volatile,
uncertain, complex, and ambiguous) world.
The coronavirus disease 2019 (COVID-19) disrupting global supply
chains in 2020 is a stark example of this VUCA world. Companies
that rely on China for all or part of their manufacturing are most
vulnerable, but the "bullwhip effect" from both plant closures and
reduced consumption will ripple far and wide. Car manufacturers
such as Fiat Chrysler and Hyundai shut down production lines, and
companies from Apple to P&G have lowered profit expectations.
As of this writing, COVID-19 is still evolving with new cases in
China on the decline, but global cases on the rise. Public
gathering places from the Louvre in Paris to schools in Seattle
have been shut down, and travel restrictions around the globe are
hampering global commerce. The resilience of global supply chains
is being tested. Supply chain leaders are being tested.
Highlights from the report
The goal of this report is to provide information about supply
chains in each region in the world, identifying their unique
characteristics, to help the decision maker arrive at more informed
decisions. Managers of global supply chains can use the framework
developed in this report to help them assess their supply chain
strategies, identifying the strengths, weaknesses, opportunities,
and threats of the different regions in the world. This framework
is termed the EPIC structure.
Several predominant themes that impact supply chain decisions
emerge from the EPIC assessment. These include the following:
Supply chains continue to undergo transition into the era of
global, IT-enabled supply chains. This transition is fueled by
political and technological innovations.
Political and technological innovations continue to level the
balance of economic power across the Americas, Europe, and Asia.
The increasing turbulence in the global geopolitical environment is
largely driven by this shift from the power structure of Western
Europe and North America that has existed for much of the last 400
years.
Emerging markets, particularly in Asia and Africa, are
experiencing high economic growth rates, providing new consumer
markets for finished goods. In all of these countries, the speed of
development, changing volume requirements, and varying geographies,
political structures, and transportation infrastructure are
challenging issues.
Emerging areas of opportunity for sourcing, manufacturing, and
logistics to support regional and/or global consumer markets
include Vietnam, Malaysia, India, Dubai, Panama, Chile, Colombia,
Uruguay, Brazil, Mexico, Costa Rica, Poland, Czech Republic,
Slovakia, Nigeria, South Africa, Kenya, and the southern and
western regions of the US. In addition, many opportunities are just
beginning to emerge in Africa, largely supported by infrastructure
investment from China.
The emerging opportunities in market, sourcing, and
manufacturing locations have predicated changing trade flows that
are shifting to highlight new areas of focus for assembly and
logistics operations. In Europe, the center of gravity for trade
flows has shifted from a western-oriented logistics network to one
that is more centrally focused on the continent. In North America,
flows are shifting from an east-west or west-east axis to a more
south-north access as Mexican ports and manufacturing centers gain
in prevalence.
Join The Global Supply Chain Institute, The Council of Supply
Chain Management Professionals, and IHS Markit for the release of
the EPIC Global Supply Chain Risk Assessment Report addressing all
these complex situations within supply chain. Webcast: Apr 23, 2020
12:00 PM - 1:00 PM EDT Register now
Posted 17 April 2020 by Aleksandra Maguire, Associate Director, Consulting and