2024 is the ultimate election year. Globally, more voters than ever are heading to the polls in over 64 countries – representing a combined population of 49% of the world.
Changes in government raise many unknowns for supply chains. New administrations may introduce tariffs, change import/export rules, or renegotiate trade agreements, all of which can disrupt established supply chain networks and force companies to adapt their sourcing and distribution strategies. Different governments prioritize certain industries or regions, potentially affecting infrastructure investments, labor laws, and environmental regulations that directly influence supply chain operations.
Today’s business leaders need to anticipate and develop strategies for various possible outcomes, including political shifts, to enhance their ability to maintain operational continuity and minimize risks to their supply chains.
If COVID didn't encourage consideration of ‘what if’ scenarios, now is the time to start.
Future proofing manufacturing and distribution
In terms of foreign trade, organizations are attempting to transition away from current supply chain models dependent on one region, such as China.
The transition away from China-centric supply chains is likely to be a slow and gradual process. Rising costs and the looming uncertainty of China’s geopolitical standing have prompted strategies to diversify supply, but many alternatives lack the necessary infrastructure, skills, and regulatory environment to replicate China's manufacturing hubs.
Rather than making wholesale moves, companies are more likely to trial operations in alternative locations or use third-party providers in countries like Vietnam, Indonesia, and India. Research shows that Apple's suppliers, including iPhone manufacturer, Foxconn, have invested USD $16 billion since 2018 to move or reshore manufacturing away from over-reliance on China. The tech giant has publicized a desire to have batteries for its latest generation of iPhones to be made in India as part of this diversification effort.
Another strategy some companies are exploring is the separation of production and assembly processes. By using automation for assembly in locations closer to retail markets, organizations are maintaining control over raw materials further up the supply chain, striking the balance between improving supply chain diversity without fully abandoning existing manufacturing hubs. This method offers a practical way to adapt to changing global trade conditions and mitigate risks associated with concentrated manufacturing locations.
Customer data for supply chain decisions
Geopolitical turbulence can affect how companies source products and share data, especially with countries that may have data-sharing restrictions. The integration of customer data into supply chain decision-making is increasingly important, but progress is hindered by an inability to share data between nations.
More organizations are wanting to connect customer data, supply chain information, and buying decisions – such as product range, quantity, sourcing, and sales strategies – into different ecosystems. However, this integration raises significant cybersecurity concerns, particularly when sharing data with suppliers in countries that may have strained relations with the company's home country.
The uncertain geopolitical climate may lead to more fractures in data-sharing, which will only delay supply chain improvements and force companies to become more insular in their data control. This cautious approach, although necessary, stands in the way of progress.
Social commerce
Social commerce has become a significant factor in modern retail, especially following the post-COVID eCommerce surge. Sales from social media platforms such as TikTok are projected to more than double to USD $144.5 billion by 2027 from USD $67 billion in 2023, eMarketer forecasts.
However, some political parties, if elected, are planning to impose restrictions on overseas-based social media like TikTok, which could significantly impact modern retail trends.
There are ongoing discussions about forcing companies like TikTok to move their operations out of China and into countries like the US. This shift could have substantial implications for supply chains, as these platforms are increasingly linked to purchasing behavior and demand forecasting, as eCommerce platforms like Amazon use algorithms to predict and influence buying behavior, by connecting demand forecasting with production and inventory management.
If the world moves from a highly connected global marketplace to a more insular one, it could significantly impact the technological developments that have been occurring in the digital-physical integration of supply chains. This shift could potentially slow down or alter the progress made in tech-enabled supply chain management and eCommerce.
Creating stability while instability looms
By staying informed, modeling scenarios, and having contingency plans, businesses can better protect their supply chains in an ever-changing geopolitical landscape.
Technology such as simulation is important to navigate the risks, simulate different ‘what if’ scenarios and assess the potential impact on a supply chain. By visualizing and understanding the possible challenges your supply chain could face, a Business Continuity Plan can be developed and applied in the event the risks come to fruition.
Risk assessment, supplier diversification, inventory management, and clear communication channels are the keys to establishing stability in very uncertain times. Today’s supply chain leaders are bracing for more change, and for technology and experience to lead them through it.