There’s an interesting article called “Supply chains worry CEOs” at the Financial Post.  That’s not a headline you see everyday.  The article references new research from McKinsey (available here with free registration).

I think the next couple of years are going to be interesting to see how they unfold.  The last several years have been characterized by substantial globalization and supply chain complexity.  Most large companies, and many smaller, have worked hard the last several years to take advantage of global cost advantages and high-growth opportunities in markets outside of North America.  This has been a win-win in that you gain cost savings while simultaneously opening new markets.

But the dynamics are changing.  The cost advantages are less (relatively speaking) and for many products/components they are virtually gone while transportation and other costs have gone up substantially.  Instead of articles and case studies about increasing globalization, I’m seeing more and more talk of rethinking these strategies as supply chain complexity, supply chain risk management, costs, slowing growth, etc. become greater concerns.

I do not anticipate a pendulum swing here away from globalization.  I think we’re going to see companies re-evaluate some of the conventional strategies that have become de facto over the last few years (like automatically moving manufacturing to China) and make some adjustments.  I think some adjustments are going to be necessary – some potentially major – to deal with some of the risks and challenges, but the fundamental benefits of globalization are just too positive to see a massive shift away from it.

What do you think?

By the way, if you’re in the electronics industry, you might want to check out what Charlie Barnhart & Associates has to say on these topics and the research they have to support their recommendations (disclaimer: we don’t have a formal relationship with them, but we’ve done some joint things in the past and I’ve been impressed with their deep insights on the industry).

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Tags: Globalization, Supply chain, Supply chain risk management
Posted in Supply chain management
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