Businesses in every sector are scrambling to buttress their supply chains against shifting geopolitical tides, as long-settled trade patterns are being diverted seemingly overnight through efforts to build new manufacturing channels for sectors like electric vehicles (EVs), batteries, and semiconductors.
To ride those waves of change, many companies are shifting their production and import/export patterns to new countries through processes such as off-shoring, re-shoring, and near-shoring, known collectively as “x-shoring,” panelists said at the CSCMP Edge show in Orlando.
Another variation on that theme is “friend-shoring,” broadly defined as moving manufacturing sites out of chaotic regions into politically like-minded countries. But while that strategy could help organizations to dodge certain disruptions such as regional wars or tariffs, it could also open them up to unexpected challenges, speakers said in a session titled “Weathering the geopolitical storm: is friend-shoring a panacea or a pipe-dream?”
For example, the frequently stated goal of “de-coupling” U.S. trade from China will probably never happen in a broad sense, but rather we will see more tightly targeted “de-risking” that shifts production only of a few specific products, according to speaker Krista Wiegand, director of the Global Security Program and associate professor in the department of Political Science at the University of Tennessee. But even that approach will probably not produce a surgically focused impact, since it will have ripple effects on suppliers in related sectors, said speaker Kevin O’Meara, executive vice president for business transformation at Shaw Industries.
In addition, the current effort to shift those trade patterns from China to Mexico, India, or other southeast Asian countries in the name of concerns about copyright infringement and national security is tougher than it seems. That because it presents a more complex challenge than business leaders faced during the Cold War, when they simply had to make a clean break with Russia, he said. In contrast, potential swings in U.S. politics between future administrations could quickly make broad changes in policy, thus changing the definition of which country is a like-minded “friend.”
“Most chief supply chain officers actually have three roles: chief supply chain officer, chief risk officer, and chief geopolitical officer,” O’Meara said. “Don’t assume there must be somebody in this big company that’s working on this, because there probably isn’t. Most people inside a company won’t pay attention to this, unless and until it hits them hard.”
Gartner, Inc.