Globalization – Are We Headed for a Geo-Political Recession?

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While globalization has led to many advantages for supply chains/procurement organizations with access to cheaper labor, lower regulations, access to markets and spreading of wealth, it also means that we are all now tied into the global economy and subject to its whims.  It is a system and any change in one part of the system has an impact on the entire system.  For the longest time, our function has been able to mostly pay scant attention to global geo-political risks but it looks like that is about to change and change dramatically.

One of the leading firms in this space, the Eurasia Group, has just published a stark report with a scary title:  2017: The Geo-Political Recession and I would encourage you to read it (regardless of your politics).  If you don’t educate yourself on this asap, you may be doing yourself and your company a major disservice.  You can also take the Next Practices survey  and mark April 4th on your calendar and spend the entire day discussing this with SMEs and senior executives>>>>>>>>>>>>>>>>>>>

The report cites the top 10 risks (in order):

  1. Independent America
  2. China overreacts
  3. A weaker Merkel
  4. No reform
  5. Technology and the Middle East
  6. Central banks get political
  7. The White House versus Silicon Valley
  8. Turkey
  9. North Korea
  10. South Africa

Their summary is that with the recent election in the U.S., a G-Zero world is here – one without a “global leader”.  They go on to cite many other incidents against globalization (unrest in the Middle East, BREXIT,  etc.).  70 years where Americanization and Globalization were tightly linked is about to end leading not perhaps to a global depression (yes, they go there!) but a chance of a global recession.

This series of events will have a significant impact on our category & supply chain strategies.  Unfortunately, very few companies have incorporated geo-political risks into their strategies.  Because of that, many of us will struggle with trying to figure out how to deal with all the talk about the potential  and perhaps significant changes in Trade, Immigration and Foreign Policy?  Don’t worry – so will a number of your colleagues.  There will be a significant impact on Category Management and Supply Chain strategies (whether you buy goods OR services) or just manufacture offshore.   Even the often derided category of Office Supplies will have to deal with the potential Border Adjustment Tax.  Change in visa policies (H1B) will dramatically alter access to critical resources (IT, Engineering, etc.) whether you are hiring them yourself or outsourcing that work.  And if it’s not your Tier 1 supplier, it will probably be your Tier 2 supplier.  This represents a major opportunity for Sourcing/Supply Chain professionals to take on a leadership role on this topic in their companies – thus moving from a tactical to a strategic advisor role:

  • Flexibility and agility will become critical in your strategies and contracting. 
  • Existing trade agreements may give way to new ones which will significantly shift cost arbitrage – your current supply base may not be competitive tomorrow.  
  • New regulations and tariffs will have an impact on lead times. 
  • On-shoring and near-shoring will become competitive again and your ability to exploit those opportunities will create competitive advantage.
  • Strategic Workforce Planning will need to incorporate new immigration and visa requirements – critical resources (Engineering, IT etc.) will require new fulfillment strategies

Your ability to get in front of all these will position you in a new strategic leadership and strategic advisor role.  Not only will you have to navigate this for your function but it also provides you an opportunity to provide intelligence and guidance to all other functions in your company – to finally grab that coveted Strategic Advisor role.  The question is, are you up to the challenge?  Take the Next Practices survey to assess yourself against the rest and the best and we will send you a comparative analysis.

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Dalip Raheja
Dalip Raheja is President and CEO of The Mpower Group (TMG). Dalip has over 30 years of experience managing large organizations and change initiatives. He has worked across the spectrums of supply chain management, strategic sourcing, and management consulting.
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