Applying a dose of hindsight to the Conference Board’s C-Suite Outlook 2022 survey report seems to reveal major gaps. Surveying 1,614 C-suite executives (including 917 CEOs globally), the report reflects “C-Suite Outlook,” exploring external stress points faced by business leaders.
The report predicts that global production networks will remain a dominant feature of supply chains, China will remain a primary manufacturing hub and the globalization of services will gain momentum. The research group’s supply chain analysis was finalized before Russia invaded Ukraine and before China enacted widespread lockdowns in response to new COVID infections throughout the country. That timing might explain the report’s lack of attention to reshoring and its assertion that an increase in localized sourcing is likely to add to inflation in the U.S. and Europe.
But it turns out that hindsight isn’t always 20/20.
New research from the International Monetary Fund (IMF) suggest that companies and countries are better served by keeping supply chains global – and even more diverse than they are today. The findings, which support the Conference Board’s prognostication, also suggest that risk managers and their colleagues in operations, finance, and procurement groups are likely to confront more, not less, complexity – along with a need for better and more frequent vendor diligence — during the next decade.
The IMF’s analysis shows that supply chain “diversification significantly reduces global economic losses in response to supply disruptions,” according to a related IMF post. “… Higher diversification also reduces volatility when multiple countries are hit by supply shocks.”
Despite those findings, the Economist reports that “governments have become keener to boost domestic production, the better to reduce their vulnerability to disruptions in foreign supplies” while noting that the IMF research “suggests that this would be misguided. Supply chains held up better during the pandemic than is often assumed … and greater self-sufficiency is likely to leave countries more vulnerable to future shocks, not less.”
While compelling, the IMF findings don’t mean that government and private industry leaders will make immediate moves to increase sourcing and country diversity in their supply chains. That said, risk managers should recognize both the benefits and risks of reshoring while continually improving their ability to address the complexity of supply chains. The following steps can help:
In a still-emerging supply chain normal, looking ahead – and backward – with a fresh perspective is helpful.
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