A global reorientation beats a global retreat

The headlines scream that the world of low costs and endless variety is gone, and consumers will suffer for years.

While largely true as a current state, supply chain professionals should not let consumers suffer for years. Rather than the great global retreat you see in many media outlets, the solution requires more of a great global reorientation.

Yes, pandemic lockdowns, societal changes, and geopolitical and financial crises have hampered the production and flow of consumer goods, raw materials, and components. Lockdowns continue on and off in China. Availability of everything from finished goods to raw materials, and prices have skyrocketed.

Even if China does not invade Taiwan (but especially if it does) and the Russia-Ukraine war ends, many commentors see the world retreating into a great power competition between Russia, China, and the U.S.

While that makes it nearly impossible to resurrect the global supply chains that filled Western stores with inexpensive goods, the world is more than Russia and China.

Some are touting the notion that countries can transform into economically independent states that produce everything their populations need.

Such economic independence is fantasy thinking, not thought leadership. Few, if any, countries could shut down international trade and provide its residents with an acceptable standard of living.

Take economic powerhouse Switzerland: Top 5 in per capita GDP and economic freedom, Switzerland has has zero oil reserves. Despite heavy reliance on hydroelectric and nuclear power, the landlocked European country must import oil and natural gas.

With supply chains broken by the Disruptions of the last few years, our profession needs to look at other options.

Reshoring and nearshoring in North America, South America, and Africa will become necessities for optionality, not just ways to guard against disruption in the future.

Whether its shoes, apparel, furniture or other goods, many countries in and outside of Asia produce consumer goods. Leaders and entrepreneurs should ask themselves what countries compete (or could compete with the right investments) in various sectors, examine ways to source product from those locations, and start building and improving those supply chains. South and Central America could become great investment opportunities for supply chain infrastructure.

So could Africa. For years, leaders have touted the continent’s potential for manufacturing and industrial growth. From a supply chain perspective, Africa is close to Europe and the Americas. West Africa can ship to Rotterdam in about 13 days or less, to New York in 22 days or less. Compare that to the 15-plus days to send a ship from China to the U.S. West Coast and 25-plus days to send a ship from China to the U.S. East Coast, and 35 to 55 days to send a ship from China to Europe.

Countries on those continents already have options available.

West Africa exports 90% of its cotton unprocessed. That raw material could fuel a textiles boom.

Brazil already is an excellent alternative to sourcing from Asia for furniture and shoes when you consider capacity, quality, shipping costs, tariffs, and manufacturing expertise.

I have found more than 18,000 furniture factories and 5,000 footwear manufacturers in Brazil who today export little product to the United States. These factories have substantial readiness, great availability of high-quality raw materials and available capacity. Mexico, by contrast, has limited capacity.

Freight to the United States from Brazil costs half the freight from Asia, the local Brazilian currency has depreciated, and the United States has not launched a tariff war with Brazil. Brazil also is the fifth largest shoe producer in the world (and number one outside of Asia) and the sixth largest furniture producer in the world.

These regions need a lot of what our profession provides: Solid logistics and supply chain networks, more capable port facilities, better transportation planning, manufacturing investment and expertise. History is replete with examples of non-industrialized regions growing into powerhouses, from Hong Kong to Japan to China. Those transformations yielded economic opportunity and higher standards of living for residents, as well as quality, inexpensive goods for the world.

Perhaps it’s the 1990s all over again, and supply chain professionals need to bring their expertise to bear throughout Asia, the Americas and Africa, giving your enterprises options against continuing global disruption.

The road will be long and hard, but our profession has done it before. Optionality, shutting down international trade, is the answer.

Jim Tompkins is an international authority on designing and implementing end-to-end supply chains. He is a serial entrepreneur who has started several businesses; worked with private equity; designed many industrial facilities and automated materials handling systems; implemented many supply chain information technology solutions and worked to enhance the performance of many 3PLs and 3PL clients. He can be reached at [email protected].

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