According to a recent article in Strategy+Business on a return, not to normal, but to reality, Mark Anderson believes that three critical measures need to be put in place before serious recovery can begin:
- Better Protection of Intellectual Property
Considering that most protection seems to revolve around patents that are abused by software patent pirates, not much progress has been made here.
- Reforms to Prevent Jackals and Vampires from Dominating the Market
Specifically, reforms to prevent short sellers (jackals) and sophisticated investors who take profits without contributing either market balance or information (vampires) from dominating the markets. No progress has been made on this front either.
- Rebuilding of the Manufacturing Base of the Industrialized World
Considering the outsourcing craze is still in full gear, especially now that even China is outsourcing to Africa, it could be a while before the manufacturing base in the developing world can even dream of being close to capacity again. Despite the fact that they haven’t learned the lessons of their peers who have found that they needed their expertise in-house and that the offshoring machine didn’t work very well.
Plus, thanks to the glut of hot money in the global liquidity pool, when the damaged parts of the split economies begin to come back, this liquidity will likely create a whiplash effect, throwing countries into hyperinflation before they can respond effectively. It seems inevitable.
And with the unemployment rate predicted to stay at 10% overall, it’s looking like a very long road to recovery.
So make sure to get your supply chain in order … you’re going to need the competitive advantage!
… but are they right? Let’s take the five global trends they have identified as key transformational forces one by one:
- The Great Rebalancing
The emerging market countries will contribute more growth than the developed ones.
Once emerging countries increase their standards of living across the board, they will no longer be low-cost countries. If you rely on low-cost countries to power your supply chain, you’ll have to find new low-cost sources of supply.
- The Productivity Imperative
Developed economies will need to generate pronounced gains in productivity to power continued economic growth.
In addition, an average company will need to generate pronounced gains in productivity and efficiency to survive — including enhanced efficiency and productivity in the supply chain. As a result, an average company will have to accelerate its adoption of new processes and technology.
- The Global Grid
The global economy is becoming increasingly connected with increasingly complex flows of capital, goods, information, and people.
The supply chain will have to become increasingly connected as well. This will require more communications and information technology at each and every stage of the supply chain.
- Pricing the Planet
Demand for resources is rising, supplies are becoming constrained, and changing social attitudes are heightening the focus on environmental protection.
Supply chains will have fewer top talent resources, will have to focus on helping engineering identify designs that require less of those raw materials in short supply, and will have to be redesigned to decrease their environmental footprint.
- The Market State
The contradictory demands of market growth and safety nets is putting governments under extraordinary pressure.
As a result, supply chains can expect to be subjected to an onslaught of legislation in the near future as governments attempt to adapt.
In other words, McKinsey is right and the five global forces will have an effect on your supply chain. In the short term, you will have to:
- streamline your processes,
- adopt new technologies,
- implement lean and minimize waste,
- improve your ability to comply with regulations, and
- start looking for new low cost sources of supply.
And then you’ll have to get creative.