Trade and tech push supply chains from global to local
- "Localism is here to stay" as supply chains shift away from globalization, Courtney Rickert McCaffrey, manager of thought leadership in A.T. Kearney’s Global Business Policy Council, told Supply Chain Dive.
- Trade protectionism, along with consumer preference for local products and emerging technologies, are some of the factors driving the trend toward localization, according to a report published by A.T. Kearney.
- Benefits of localization include lower environmental impact in logistics and shipping, increased transparency and often shorter supply chains. Downsides could be increased costs and a fundamental shift in management and corporate culture of a company, McCaffrey said.
Protectionist trade measures implemented this year have led many businesses to shy away from the global market, as the cost of importing and exporting goods increases with tariffs.
"Governments are pushed inward by nationalist and protectionist sentiments and every economy becomes its own island," A.T. Kearney wrote in its report.
The move toward localism, however, is much broader than global politics and trade, McCaffrey said.
Consumers increasingly prefer local products, produced in their home countries or regions, using local components or ingredients. A.T. Kearney found in the U.S., 55% of respondents in a survey of consumers said they had little to no confidence in large corporations. In 2012, that figure was just 36%.
To cater to the changing tastes of their customers, the majority of companies are exploring and implementing localization. "What this entails is unbundling the value chain and figuring out which aspects of their business need to be localized," McCaffrey said.
For many supply chains, transitioning from a global network of sourcing, production and distribution to a local one is no easy task. This is especially true for businesses that rely on products that are not necessarily available in every region.
"Companies are becoming increasingly nervous about the Democratic Republic of the Congo's monopoly on the supply of cobalt," McCaffrey said, a key component in various types of batteries, including those used in electric vehicles. "There are a lot of companies that are exploring alternatives to cobalt ... so they're not so dependent on a single location."
In addition, some businesses are embracing emerging technologies that can help decrease reliance on a single source or production facility.
"3D printing can shorten the supply chain almost to nothing," McCaffrey said. Few companies are using the technology as their primary means of production, she said, but they are exploring pilot projects and ways to localize supply chains using 3D printing.
Adidas, for example, is 3D printing parts of its shoes closer to the end consumer in the U.S. and Germany. "Their vision for the future is to 3D print soles for the shoes at the store based on a scan of the consumer's foot," McCaffrey said.
As businesses embrace moves toward localization, they should also keep in mind that trends of local and global supply chains are part of a cycle. "How long that cycle will be is an open question," McCaffrey said. "We don't see this localism movement going away any time soon."
- A.T. Kearney Competing in an Age of Multi-Localism
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