Are there any Global supply chain risks? Here are the expected risks.
The problems that could arise from moving production thousands of kilometers from the market were not unknown. For this same reason, and due to supply needs, actors have been reducing the links in the chain for years to be closer to where they are going to sell their products, Gandoy points out.
"All this has its own logic, which is the logic of globalization," explains the Professor of Applied Economics, José María Serrano Sanz, a researcher in the Foreign Sector and Monetary Integration (SEIM) team at the University of Zaragoza.
"It is not an effect of the health crisis, as it was not an effect of the financial crisis of 2008. Those are accelerators. Although it is true that, when a health crisis arrives and you realize that you cannot manufacture antibiotics on your own, the problem is bigger than you imagined," he says.
"The need to reorganize already came from a little earlier and the shortening of the chains as well. The pandemic has accentuated it a lot because shorter chains are also safer chains to the extent that they have fewer links and, therefore, are better controlled, " agrees Gandoy.
Global supply chain risks
These risks could have been foreseen, according to the expert. The chains generate a very intense dependence between the countries. That means that when something happens in one of the economies, the effect quickly moves along the chain affecting the others.
"The lower diversity of sources decreases resilience and a longer chain assumes more risks than a shorter one," explains Gonzalo de Oña, managing director of Accenture Strategy.
Imagine that, like the PlayStation, you have to assemble a car.
If, in order to assemble it, you need to pass each of its parts through one or more borders, a delay could delay the delivery of the model for months. If the problem is that one of the essential parts for the operation of the car is missing — which is only designed in a specific country, such as microchips —, the model directly could not be on the market for years, with the consequent impact for companies.
"It also looked like something so exceptional that it was not easy to see," the expert acknowledges. "What the pandemic has done is to highlight the need to know these production chains better."
At the beginning of the spread of the virus, for example, many believed that, since there was no Chinese manufacturer among their first-order suppliers, they would not suffer the consequences of the closures. But they were unaware that their own suppliers often had a second or third supplier of Chinese origin — and these would also make them suffer the consequences of the closures.
Global supply chain risks improvements
The rethinking of global value chains is inevitable in order to save economies dependent on the global production chain, recover damaged competitiveness and ensure supply — which is the most important thing right now, according to experts.
From now on, we will see a shortening of the chains to avoid the amplifying effect of the transmission of economic shocks. But the process is time-consuming and expensive.
"One talks about safety, security and security, but it is also important to convey that moving towards resilience entails costs that are likely to materialize in prices," warns Gandoy.
"It's an expensive process. As a collective, it's going to make us live worse, because you're going to have the mobile phone a little more expensive than if it were made in China. And it's not done overnight. But we are going to make sure we have what we need," explains Serrano Sanz.
"When you start to see that security of supply is not guaranteed, you start to think that security is worth more than the price," he adds.
A McKinsey report concluded that companies that aimed to regain production in 2020, when the pandemic closed factories around the world, in 2021 had chosen to increase available inventory and even join rivals to activate emergency backup facilities.
Global supply chain risks consequences
As a consequence, it is expected that the main players in the GVCs will contemplate alternative markets, substitute products, increase stocks and resort to new technologies for the early detection of disruptions in the chain or to provide solutions to the increase in costs in economies where it was cheaper to produce.
"We are collaborating with multiple companies to define segmentation strategies, develop digital twins that allow us to evaluate multiple growth, efficiency, resilience, sustainability and capacity scenarios. As well as helping them generate greater visibility of what is happening from start to finish (where the merchandise is, stock in transit) in their GTC", explains Oña.
Experts believe that 2 large optimal business areas are going to be established in the world, which share economic and cultural traits.
"The world is probably going to reconfigure itself into large economic areas and large commercial areas because now we are discovering that the only important thing is not to have cheap products, but simply to have products. And, when security is of interest, the world of globalization loses whole", suggests Serrano Sanz.
Global supply chain risks rules
It is not the same that Spain depends on France — which is also in the European Union, which follows the same rules and has common institutions — that it depends on China or Russia.
"That means getting closer to neighboring countries and, probably, in this greater shortening of value chains, having more with the next and related ones," predicts Gandoy.
In this scenario, Spain has an opportunity, thanks to the combination of its geographical location, the existence of infrastructures and the field of logistics knowledge of workers and companies.
"Spain has an optimal location as a gateway to the Mediterranean, as a distribution hub to Europe on land and has an important air traffic network from Europe to South America," says Oña, who believes that it is still too early to talk about 2 large commercial blocks.
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