‚Ignore supply chain risk at your peril,‘ says Ti CEO

In the run up to the World Economic Forum meeting at Davos, John Manners-Bell, Ti’s CEO spoke at the Horasis Annual Meeting in Zurich, Switzerland.

The meeting was entitled ‚Thriving on Risk‘ and addressed the salient political and economic risk factors affecting the OECD, BRIC and New Frontier economies.

In his address, Manners-Bell warned that although global supply chains had created mutual benefits for developed and emerging markets alike, these same supply chains had increased risk to the entire global economy. Reliance on production in markets such as China and the rest of Asia Pacific has put Western economies at the mercy of inflationary pressures, including labour costs, oil price rises and shipping.

Production in remote locations has also brought with it increased exposure to natural disasters, such as the tsunami in Japan and the floods in Thailand. These events brought massive disruption to automotive and high tech supply chains, but both could have been much worse. In addition to this, transport bottlenecks such as the Suez Canal and the Malacca Straits are exposed to terrorism and the seas off Somalia and Nigeria are vulnerable to piracy.

However, it is shipping costs which may prove to be the major factor in influencing supply chains of the future. The volatility in the shipping market, partly due to the inability of shipping lines to match supply and demand and partly due to the oil prices, has vexed global manufacturers for some time. The economic downturn has provided a respite to these costs, but in the long term these issues will need to be addressed. Production is likely to become more regional, Manners-Bell said, with increasing use of near-souring locations for developed markets. The rise of the emerging world as a consumer market in its own right will also influence manufacturing strategies, with production locations based in the regions they supply.

Manners-Bell went on to say that transport infrastructure was key to the success of emerging markets. China has invested enormous sums in ports, roads and airports which have allowed for its integration into global trading networks. This is in stark contrast with the other BRIC nations, who will risk being left behind. ‚Connectedness‘ remains the main barrier to developing markets.

There is no doubt that manufacturing jobs – a key issue in the US presidential election – are never likely to return to the West. However, the replacement model which has emerged, underpinned by extended global supply chains, is not wholly sustainable as risk has not been fully understood or costed. The challenge facing global manufacturers will be to balance these risks implementing supply chain strategies that deliver long term value to consumers and shareholders.

Quelle: eyefortransport
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