Given the recent supply chain failure of Imperial Oil, as laid out by David Rotor over on the Procurement Investor blog (which is still being felt by many Canadians who saw gas prices spike 35% in some places), I think it is worth pointing out an AMR Research article from January that noted that we are in times of unique economic and environmental changes and that the current political and economic environment is a dynamic that we have not seen since 1880, echoing Newsweek International editor Fareed Zakaria, which has created a paradox that, according to the article, most economists are not getting right.
Global growth is fueling capitalism which is fueling demand. But these
demand shocks are dampening political changes and their effects. Thus
changes in government structures, civil unrest, and natural disasters are not
having the normal impact and are creating unusual market behavior.
Countries and companies have greater interdependencies economically and
environmentally than we have ever seen before. And some 1.5 billion people
have been added recently as consumers in global markets, which is creating
rampant capitalism along with the formation of anti-capitalist islands with
strong nationalism. The result: an economic climate that includes a new
type of risk and impending uncertainty.
According to Mr. Zakaria, the paradox will only widen. Largely due to China, with its 1.3 billion people and its current growth rate of 9.5% over the last 30 years. Furthermore, supply chain professionals can no longer depend solely on political infrastructure as the primary framework for global trade. Business must shoulder more burden for economic and environmental issues as they enter global markets.
But there is a fix. Invest in two-way processes in supply chain relationships, build collaborative relationships with a foundation of strong win-win value propositions, and recognize cultural differences. This is backed up with examples that include McDonalds, Dow, IBM, PepsiCo, and Toyota.
And finally, don’t overlook risk. Look for it, analyze it, come up with ways to prevent against it, and have backup plans in case it happens anyway.