**London**: A recent report highlights critical trends in global supply chains, revealing a shift towards regionalisation, resilience, and sustainability. Over 90% of manufacturers are adjusting their strategies to mitigate risks through enhanced sourcing techniques, while countries are ranked based on readiness for supply chain investments.
A joint report released by the World Economic Forum (WEF) and Kearney has identified critical trends in the evolution of global supply chains, emphasising the increasing importance of regionalisation, resilience, digitalisation, and sustainability. Titled “Beyond Cost: Country Readiness for the Future of Manufacturing and Supply Chains”, the report provides a comprehensive analysis of how manufacturers are adjusting their strategies in light of geopolitical changes, trade disruptions, and technological advancements.
The findings indicate a significant paradigm shift in decision-making processes related to supply chains. Companies are now considering not just cost but also performance, resilience, and sustainability when determining manufacturing and sourcing locations. Over 90 per cent of global manufacturers are prioritising regional supply networks, seeking to enhance resilience and ensure operational continuity amid ongoing disruptions.
In a survey of 300 global operations executives conducted as part of the research, nearly two-thirds reported that they are adopting a “power-of-two” geographical sourcing strategy. This approach involves securing supply from at least two separate regions to mitigate risks stemming from trade conflicts, regulatory changes, and climate-related disruptions.
The report categorises countries into four archetypes based on the manufacturing sector’s contribution to GDP and GDP per capita:
- Adapters: Countries with low manufacturing contributions to GDP and below-average GDP per capita, such as Brazil and India.
- Convergers: Nations characterised by low manufacturing contributions yet above-average GDP per capita, including Denmark and the United States.
- Connectors: Countries with high manufacturing contributions but below-average GDP per capita, such as Mexico and Vietnam.
- Scalers: Nations where manufacturing constitutes a high part of GDP and GDP per capita is above average, represented by countries like Ireland and Singapore.
Notably, the Foreign Direct Investment (FDI) Confidence Index highlights that Connectors like Vietnam and Mexico are experiencing increased foreign direct investment, whereas Adapters, such as Brazil and India, are losing appeal for inward investment.
The report outlines seven essential factors that determine a country’s readiness for supply chain investments:
– Infrastructure: Transport networks, digital connectivity, and logistics capabilities.
– Resources and energy: Reliable access to raw materials and energy sources.
– Technology: The presence of research and development ecosystems and effective intellectual property protections.
– Labour and skills: Availability of competent, skilled workers, especially those in STEM fields.
– Fiscal and regulatory environment: Supportive tax policies and business frameworks.
– Geopolitical landscape: Factors such as trade policies and political stability.
– Environmental, Social, and Governance (ESG): Commitment to sustainability standards and responsible corporate behaviours.
Additionally, the report points out several initiatives aimed at aligning with these readiness factors. For instance, Singapore has developed “Smart Industrial Parks” that provide integrated logistics and utilities, while the United Arab Emirates has launched a Demand Side Management Programme to enhance energy efficiency in industry. India’s Promotion-Linked Incentive (PLI) Scheme offers financial support for manufacturers to reduce import reliance, and Mexico has implemented labour law reforms to ensure better compliance with international trade standards.
The report also highlights significant corporate initiatives that have bolstered industrial competitiveness. In Singapore, manufacturers are collaborating with the Economic Development Board to integrate renewable energy within manufacturing processes, aspiring for carbon neutrality by 2050. In a separate development, Intel has committed $50 billion to expanding its semiconductor operations in Israel, supported by tax incentives and infrastructure advancements.
Regarding Australia, the report positions the country favourably in several key readiness factors, such as energy security, with significant renewable energy investments, and a high availability of skilled workers essential for advanced manufacturing. Australia’s commitment to achieving net-zero emissions further enhances its appeal for green manufacturing investments.
However, the report indicates that Australia must enhance its logistics infrastructure to remain competitive as a regional supply chain hub. The efficiency of its physical infrastructure, particularly in port connectivity and freight operations, lags behind leading nations like Singapore and Ireland, which have successfully harnessed advancements in digitalisation and logistics efficiency.
In summary, the “Beyond Cost” report presents a comprehensive overview of emerging trends in global supply chains, emphasising the shift towards multi-regional sourcing strategies, the pivotal role of technology, and the centrality of sustainability in industrial policies. The findings underline that public-private partnerships are instrumental in boosting national competitiveness, as collaboration between governments and the corporate sector aims to foster innovation and support workforce development. Companies and nations actively adapting to these trends are well-positioned to navigate future disruptions and seize new opportunities within the evolving landscape of global supply chains.
Source: Noah Wire Services
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