Globalisation shifting owing to supply chain disruptions, research finds
New research has revealed the emergence of major shifts in globalisation, as companies rush to move manufacturing closer to home to protect against supply chain disruptions, while increasingly protectionist policies are breaking the world into trade blocs.
The latest ‘Trade in Transition’ study, commissioned by supply chain logistics provider DP World and led by Economist Impact, captured the perspectives of company leaders as they navigate the latest disruptions to global trade – from the conflict in Ukraine to inflation and extended Covid-19 lockdown policies in some markets.
Its key finding is that 96% of companies have confirmed they are making changes to their supply chains owing to geopolitical events.
The change is indicated to have been swift. In the space of just a year, the number of companies shifting their manufacturing and suppliers – either to their home markets or nearby – has doubled compared with 2021. This is driven mainly by efforts to reduce costs and the risk of disruption.
However, the shifts are said to be uneven. While 27% of companies said they were decreasing the length of their supply chains owing to geopolitical events, such as the war in Ukraine, another 33% plan to expand into more stable and transparent markets.
INFLATION THREAT
The persistent threat of inflation was cited by 30% of the surveyed executives as having the most significant negative impact on trade over the next two years.
Inflationary pressures are seen in input costs – from supply shortages – and transport, through to high energy costs and shipping capacity constraints.
In a scenario of monetary tightening, companies across Europe, North America and Asia-Pacific anticipate exports to be 1% lower than under a business-as-usual situation owing to decreasing production and demand.
If inflationary pressures continue, exports in the Middle East and South America are expected to be hardest hit, declining by 3.52% and 2.74%, respectively. Only Africa is expected to see its exports rise by 0.26%.
FRAGMENTATION
The fragmentation of the world into trade blocs was also cited by 10% of respondents as limiting the growth of international trade.
Beyond the war in Ukraine, US-China tensions and cyber warfare are preventing the efficient functioning of economies worldwide. This is leading to increasingly protectionist policies globally, leading to further fragmentation of the global trade system.
However, businesses are said to be finding ways to respond and grow. Altering supply chains either through diversification, regionalisation or reshoring to build resilience is noted as one response.
The global survey of 3 000 company executives found that companies in North America and Europe are most likely to outsource more than half of their services within their region. This is followed by 40% of companies in South America, 36% in the Middle East, 32% in Asia-Pacific and 18% in Africa.
The widespread and increasing adoption of technology is indicated to be another way to build resilience into the supply chain. Some 35% of respondents said they were currently implementing Internet of Things solutions to facilitate the tracking and monitoring of cargo, while another 32% of companies are adopting digital platforms to enable direct business with customers or suppliers.
Comments
Press Office
Announcements
What's On
Subscribe to improve your user experience...
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation