WP_Post Object ( [ID] => 29358 [post_author] => 34 [post_date] => 2020-10-19 08:12:11 [post_date_gmt] => 2020-10-19 07:12:11 [post_content] =>

I was watching one of the global financial news channels a few weeks back and this comment by Bridgewater Associates got me thinking: “Globalisation, perhaps the largest driver of developed world profitability over the past few decades, has already peaked. Now the US-China conflict and global pandemic are further accelerating moves by multinationals to reshore and duplicate supply chains, with a focus on reliability as opposed to just cost optimisation.”

The Covid-19 pandemic has brought a spotlight to tensions that have been brewing over the last decade and accelerated the current rise in nationalism and subsequent geopolitical tensions. This, followed by the already bleak global financial situation with growth in both government and corporate debt, coupled with low interest rates, leaves very little room for governments to manoeuvre. Have we reached the pinnacle of globalisation and are we in for a reshuffling of priorities?

From local and national lockdowns, imbalances in trade, blank sailings and container imbalances, to nations protecting their own self-interests (including the restricting of PPE and other essentials exports), the pandemic has magnified the weaknesses in supply chains and led to a sense of national vulnerability. If political desire and commercial necessity lead to a diversification of risk and duplication of supply chains, what will this look like and how will it affect the chemical industry?

So far we have seen a change from just in-time planning to receivers being inclined to hold stock. Will this go further and to what degree will we see manufacturing splinter and migrate closer to market? If so, will we see segmenting along geographical or ideological lines and how will this affect trade flows?

EXPECT THE UNEXPECTED

None of us could ignore the impact this pandemic has had on jobs and the economy. While those countries that have opened up sooner are seeing an increase in demand, we have to question whether, with job losses, this demand is sustainable. Since the bailout of 2008/2009, we’ve had lowering of interest rates, and in the West a stagnation of earnings. For many countries and businesses the levels of debt has increased to new highs. While many countries have brought in significant support packages, the effects of most of these are likely to be temporary in nature. This leaves governments across the globe with very little in their armouries to boost their economies.

As has been seen in the retail, hospitality, and travel sectors the level of indebtedness has led to some ‘unexpected’ bankruptcies. We have to ask not only whether our customer will be here tomorrow but how robust are our suppliers and are they able to weather the storm? The growth in globalisation has been fuelled by an insatiable need for greater growth, which has led to a continuous drive for cost reduction, to the point where less businesses have the wherewithal to weather the sort of ‘storms’ we’re seeing.

A supply chain is just that, a chain of individual links, only as strong as its weakest part. What responsibility are we each taking for ensuring that the other parts of the chain are strong? Many of us have corporate values stating our commitment to valuing and treating suppliers fairly, but what is the reality on the ground?

If the hypothesis in some small way proves to be true, where does this leave us? They say the biggest fish are found in muddy waters. If we have based and run our companies on solid fundamentals and have nurtured a culture of adaptability, opportunities will be found. There is a reasonable expectation that we could see higher inflation in the future. For those with the reserves, now might be the time to invest.

THE RIGHT PRICE

John Ruskin, the prominent 19th century social thinker, said: “It's unwise to pay too much, but it's worse to pay too little. When you pay too much, you lose a little money - that's all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot - it can't be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”

Is now the time to invest in the integrity of the supply chain? This will cost short-term profits but will ensure those links with the right commitment to the rest of the chain are strong and dependable.

It may also become more important than ever to proactively decide which partners, both customers and suppliers, you link yourselves to and whether they have the financial fitness to, at the very least, ride out any storms ahead. In choppy waters none of us needs the weight of others who can’t carry their own commitments.

www.mslogisticsltd.com

[post_title] => Re-emergence: What's next? [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => re-emergence-whats-next [to_ping] => [pinged] => [post_modified] => 2020-10-19 08:12:13 [post_modified_gmt] => 2020-10-19 07:12:13 [post_content_filtered] => [post_parent] => 0 [guid] => https://hcblive.com/?p=29358 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw )