Global supply chains are once again at a critical juncture. Trump induced tariffs, tighter red tape and global trade disruptions continue to make headline news, and are making supply chains more complex, more costly and more localised.
But while new tariffs are prompting a shift in sourcing locations, trade routes and end destinations, this is far from a new phenomenon for the industry. Issues and blockages occur all the time, especially in today’s fast-changing socio-political and economic climate. What it does highlight, however, is a need for supply chains to evolve in line with their new environment, to accelerate cross-border trade, reduce administrative burdens and enhance industry collaboration to avoid these issues and minimise business risks going forward.
Those that establish business resilience now will have a distinct advantage in maintaining flexibility, compliance, and efficiency in a rapidly changing global trade landscape. Our industry research shows that US supply chain leaders are planning on increasing investment in supply chain technology by 7.5% over the next year. But where do organisations start? And, how do they make sure that the changes they make now will be proof against the next big industry disruption?
Accelerate cross-border trade and diversify sourcing strategies
We’re now seeing a shift towards nearshoring and friendshoring, where supply chains prioritise trade partners least impacted by protectionist measures and tariffs. With US tariffs on Chinese goods increasing, for instance, supply chains will likely pivot to alternative manufacturing hubs, such as Vietnam, India, or Mexico. Of course, recent events have proven that these countries are also at risk of US tariffs.
Here, US companies may face reduced competition in some industries, but at the cost of higher prices and reduced supply options – which may prove detrimental to several domestic markets and well-established global trade flows. This forces OEMs to absorb the costs or seek alternative sourcing strategies and locations, achieved through building relationships with markets harboring more favorable trade policies, and more accessible supply chains.
But in doing so, businesses can get tied up in red tape in unfamiliar markets, and struggle to keep up with differing cross border and product compliance regulations. This can be a stressful experience and lead to delays, product seizure, fines and impending reputational damage. Procurement and supply chain professionals in the operation of trade may also face legal action or lose licenses in the process.
Short term fixes
Many international manufacturers are seeking a short-term fix, rushing through large volumes of trade to the US before tariffs take effect, causing significant strain on already fragile global supply chains. Here, the danger is that manufacturers have cash tied up in unsold stock, a common, and potentially devastating, indicator of overreliance on a single market. Additionally, trade ecosystems are operating beyond capacity, meaning more room for human error, fraud and data breaches, and lost cargo, should it all go wrong.
Smart procurement officers and organisations need to strengthen supply chain networks and build business resilience to accelerate trade, and navigate congested trade lines, particularly if they are to shift sourcing and end destinations. Many OEMs are already working to restructure supply chains by moving production closer to demand centers, but doing so takes time, agility and investment.
Reduce administrative burdens and build business resilience
An alarming 67% of supply chain and procurement professionals are concerned about human errors and mistakes in managing global supply chains. Almost a fifth (18%) still use paper-based systems, like manual logs and forms. In the modern world, these processes are no longer good enough. After all, AI, predictive analytics and automation are only as effective as the quantity and quality of the data they’re sitting on. Mapping out, digitising, and making the supply chain ecosystem accessible is key.
But just knowing where products are isn’t enough. Even if businesses create visibility in their supply chain, they can be left ‘in the dark’ on its status, and without the ability to make actionable changes, particularly in case of disruption. Investing in good data foundations falls down if systems are operating in silos.
Through building in tools like compliance, risk assessment and mitigation planning, demand forecasting and inventory management, into digital supply chains, procurement professionals and supply chain operators benefit from an automated, agile trade ecosystem, helping them to navigate turbulent waters and congested trade lines with relative ease.
Interoperability
Key to success in doing so, however, is building interoperability into the supply chain ecosystem, making sure that different computerised and automated systems can connect and exchange information with each other at all stages of a product’s journey. Critically, this also means hosting a network that enables differing IT systems to work together, while integrating digital identification systems, reducing data silos and helping to track goods from warehouse to delivery.
This data is then shared between each trading partner in the supply chain, providing supply chain manager with a real-time oversight of a product’s journey. As a result, supply chain operators can quickly adapt to changes in demand, or if a chain disruption takes place, the problem can be identified quickly, and rerouted to minimize ongoing disruption, reduce business risk, and ensure operational continuity.
Enhancing industry collaboration and staying digitally protected
Organisations need to share data, insights and risk assessments to collectively strengthen supply networks. But many businesses face limited budgets for digital transformation, making investments in cybersecurity and interoperability more challenging.
Without proper data-sharing infrastructures, supply chains risk inefficiencies and increased exposure to fraud and cyber threats, particularly if businesses rush through the process, or try and enforce unfamiliar digital systems on their partners.
Emerging technologies such as blockchain can help mitigate these risks, providing end-to-end visibility and authentication in a time when supply chain fraud is an increasing concern, offering robust security protocols, access controls and audit trails that only permissioned network members can access.
Integrating blockchain security with interoperability strengthens the overall resilience of the supply chain ecosystem, facilitating collaboration and trust between trading partners, reducing bottlenecks and providing data that stakeholders or security partners need to respond to issues in real time. This is achieved through standardising data security practices, minimising vulnerabilities caused by isolated or incompatible systems and enhancing security measures for trade as it moves along its journey.
Adding a layer of strategic thinking
Predicting the future of the supply chain is an impossible task, but we know that trade disruptions, socio-political and economic issues will continue long into the future. What they highlight, however, is an opportunity for supply chains to evolve in line with their rapidly changing environment and build competitive advantage in the same process.
By digitising the supply chain, procurement and supply chain professionals benefit by better informed decisions, and a means to protect against trade disruptions, while also streamlining safe, secure and effective operations. Those that establish business resilience now will have a distinct advantage in maintaining flexibility, compliance, and efficiency in a trade environment that changes each and every day – and ensure that they are ready for the next global trade disruption.
But technology can’t do it all. Once the systems are in place, organizations must maintain safe stock levels, establish alternative transportation routes and diversify sourcing locations to mitigate future impacts. So, when the next delays occurrm, there are clear processes and actions in place so that businesses can resolve these issues in a few clicks.
