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Saturday, 29 February 2020

"Tectonic shift" in supply chains already happening (Axios)

Axios title: "Tectonic shift" in supply chains already happening

Date: 11 February 2020


"Supply chains, even for companies outside of China, are in motion already as businesses rethink their strategies in a new global environment.

Driving the news: A new survey of analysts who cover more than 3,000 companies from Bank of America Securities is finding a "tectonic shift in global supply chains."

  • Companies in more than 80% of 12 global sectors, representing $22 trillion of market cap in North America, Europe and Asia-Pacific (excluding China), have "implemented or announced plans to shift at least a portion of their supply chains from current locations." (Emphasis theirs.)

What's happening: Companies say tariffs and the U.S.-China trade war have helped prompt this reassessment, but it's largely based on automation, which has made the labor-cost benefit of outsourcing and offshoring less attractive.
  • Automation was cited as a key enabler of shifting supply chains by 90% of respondents.
  • Outside of financial considerations, BofA found companies worried about national security and "ESG concerns of high carbon footprints associated with long supply chains and potentially problematic employment practices."

Watch this space: Many companies said they were considering locations in India and Southeast Asia, but companies in about half of all global sectors in North America declared an intent to "reshore" or move business back to North America.
  • "This was particularly true for high-tech sectors and industries for which energy is a key input. If borne out, this could represent the first reversal in a multi-decade trend," BofA's global research team said in the note.

What it means: The shift could mean bigger investments by North American companies at home rather than abroad, including increased spending on automation and manufacturing that "would have multiplier effects on the broader economy and be beneficial for financial services that cater to them."

Go deeper: The slippery slope of supply chain fears "

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