Supply Chain Disruption And Recent Developments Is Crucial To Your Business. Learn Why!

At First, why western countries rely on developing nations?

Companies used outsourcing, offshoring, and lean manufacturing practices to minimize costs, maintain market position, and gain a competitive advantage. As a result, they have outsourced the work to underdeveloped countries to complete it more cost efficiently.

How need for localization realized?

1.SARS, Tsunami, floods, and other natural disasters. (2003 -2011)

2.Financial Crisis (2008).

3. Losing control over pricing of oil and natural gas.

Why Pace of supply-chain localization raised significantly? (2018 – 2022)

1.Russia invasion in Ukraine

2.Pandemic

3.China-US trade War

4.Climatic disruption

Effects of supply chain disruption:

1.Wheat, Barley, corn, and fertilizer price hits record high.

2.Oil and Gas Price hits record High.

3.Transportation of raw materials and finished goods from east to west got affected.

4.Ukrainian Neon gas for semiconductor production got hit.

5.Supply of Wiring harness for Auto sector got affected.

6.Suppy of chemicals and minerals for battery manufacturing got struck.

Need of Hour:

1.Comapnies need to reduce Global exposure to Operational Problems.

2.Responding much faster to local demands.

3.Semiconductors, autos, and medical sector need to shift part of their supply chain to current location.

4.Increasing control over Energy and Power supply.

Major Moves took place:

1.US Federal and state government increasing investment in ports, Airports, and other infrastructure.

2. The U.S. CHIPS Act (which Congress has yet to fund) and the European Chips Act are examples of government efforts to reduce dependence on Taiwan and South Korea for semiconductor.

3. Recent decision by Schneider Electric to build three new manufacturing facilities in North America, one of which will be in El Paso, Texas, and the plan by automakers and battery manufacturers to establish 13 new electric vehicle battery factories in the United States within the next five years.

4. Volkswagen and BMW have been closing assembly lines in Germany due to the shortage of wiring harnesses manufactured in Ukraine by the German company Leoni.

5. Tire manufacturer Michelin has recently announced it could close some plants in Europe due to logistics issue created by Russia’s invasion of Ukraine.

6. Intel’s recently announced plan to spend $20 billion to build two semiconductor factories in Ohio.

Conclusion:

Companies should stress test their supply chains and develop measures to make them more resilient to hazards until local infrastructure expenditures are made. The only certainty right now is that global supply chain difficulties will continue to grow in the foreseeable future.