Evidence is growing that international trade and perhaps the entire concept of globalization is being slammed by changing conditions.
We’ve already talked about rising prices for bunker fuel making container ships less profitable and eating into the margins for cheap products from the developing world. Now comes a McKinsey Quarterly survey showing that risks for supply chains are rising sharply for other reasons as well.
Energy price hikes are one reason why supply chain managers are more nervous. But the leading cause of concern is that products and services are becoming more complex and that is making them harder to ship cheaply and efficiently.
It seems that the days are gone when a Wal-Mart or other mass market retailer could simply pick up some T-shirts or flip flops from Guatemala or China, ship them out and enjoy the margins. More and more complicated products are being made. Shipping them requires higher degress of sorting, packaging, etc.
A third-ranking worry, according to McKinsey, is the volatility of financing. Among the least bothersome concerns are geopolitical instability, human rights issues or global warming concerns.
How are supply chain managers reacting? Cutting costs, followed by trying to improve customer service. Such approaches might seem mutually exclusive and they probably are. Next, managers tend to try to get new products to market faster and improve their supply chain’s reliability.
Among their biggest challenges are making sure that different locations in the chain all sing from the same choir book and share knowledge and manage communications and cultural differences well.
Staying atop of changes affecting global trade is a big deal since so many economies rely on the concept of globalization. We’ll watch for more clues.
