Supply chain leaders want a clear view of the landscape, and it is indeed becoming clear. That view might be more like the scene from a Pieter Bruegel the Elder painting in the 16th century, but it is clearer nonetheless.
U.S. trade with Russia is largely banned or sanctioned, and relations with the United States are at a low. Western Europe is on high alert for possible sabotage, spying and covert operations from the bear of a neighbor to their east. After a few years of optimism, the expectations for improved relations with China have proved unrealistic. U.S. sales of arms to Taiwan have resulted in a “string of discordant issues.” The Middle East is a hotbed of insurgency, and relations between Israel and Iran are hostile. The world is recovering from a recent oil shock. High inflation puts the United States on the brink of a possible recession.
The above is compiled from news sources between 1979 and 1983, and bears an eerie resemblance to the world in 2023 .
No Going Back
The past few years have kept business leaders in an understandable wait-and-see posture. From the perspective of hindsight, though it may not have felt like it, the period from 2008 to 2019 was, comparatively, marked by an acceptable level of predictability and stability. It’s safe to say at this point this period of relative stability is fully in the rear-view mirror. But throughout 2020 to 2022, that wasn’t fully clear. Most leaders were uncertain about that stability. Would it return? Would we go back to the 2019 trajectory? The jury is in, and the verdict is we are not going back to 2019.
Over the past few months, we’ve noticed a step-change in the posture our clients are taking. Most leaders now seem fully certain of the instability facing us in the future. Perhaps it was the ringing in of the New Year. Maybe it was a general fatigue of not feeling in control. Whatever it is, we’re all eager to take back control from the whiplash of the past three years. We’ve awoken from the stupor of being a victim of changing circumstances to a newfound energy to say, “No more!”
We can regain our sense of certainty in that we probably have a good taste of what the future will look like — unstable. There is some level of comfort in having a clearer road to follow.
While there is a lot of instability on the horizon, smart business leaders are grabbing hold of the certainty they do have. And within these geopolitical and climate instabilities, supply chain leaders can be sure of a few things.
- The West’s relations with China are strained, and that probably isn’t changing any time soon.
- The West’s relations with Russia are strained, and that probably isn’t changing either.
- Climate change is increasingly disruptive, and we can be certain this will intensify.
- Supply networks are shifting in response to nationalism but moving slowing.
Don’t Toss, Tweak
Regardless of geopolitical tensions, reports of the death of globalization are greatly exaggerated. Trade between the United States and China reached record levels in 2022 despite an increasingly tense international relationship. Reshoring and “friend shoring” have been the buzz words for some years now, but significant realignments of supply networks have not taken place. Supply networks are continuously in motion responding to opportunities as well as risks and restrictions, but they are not pulling up stakes and moving home.
The question for supply chain leaders is: ”How should the supply chain operate differently under instability?” Where in the past we’ve valued our planning function’s ability for forecast accuracy, we need to shore up their ability to prioritize. In sourcing, we’ve doubled down, literally, on redundancy strategies. Not a bad idea, of course, but we need to think more about balancing that with resourcefulness instead. Enable the supply chain to do more with whatever it can get, rather than what it wants to have.
In the past we have valued manufacturing’s focus on efficiency and productivity. We need to balance that with a stronger “switching” muscle. The long slog on making things incrementally better will need to be augmented with the ability to pick up and move.
Logistics has already shifted from finding any available capacity possible to move goods to being awash in options for air, sea and land. 2023 will be a lull in the capacity storm, but this can’t be relied on as the new normal. There are already rumors of a bullwhip effect in 2024 as the global economy is forecasted to even out.
It may not be a pretty picture, but we have been in similar situations before. The lines are being drawn; the guardrails set. The result is a landscape that is predictably unstable in the coming years. Supply chain leaders need to embrace what they have and move confidently forward.
Wade L. McDaniel
Distinguished VP Advisor
Gartner Supply Chain
Director, Research and KI Leader
Gartner Supply Chain
Register for upcoming webinar: Build a Supply Chain That Thrives in a Low-carbon Economy
Listen and subscribe to the Gartner Supply Chain Podcast on Gartner.com, Apple Podcasts, Spotify and Google Podcasts
The Gartner Blog Network provides an opportunity for Gartner analysts to test ideas and move research forward. Because the content posted by Gartner analysts on this site does not undergo our standard editorial review, all comments or opinions expressed hereunder are those of the individual contributors and do not represent the views of Gartner, Inc. or its management.