Management, for demanding ever cheaper costs? No.
Consumers, for demanding ever more variety in your product offerings? No.
You blame information and communication technology, or ICT. We made it all possible. We opened the world up to you. It’s true that you didn’t have to try and conquer it, but you did, and now you have supply chains with complexity spiralling out of control.
And this view is backed up by recent research by Mr. Richard Baldwin of the Graduate Institute of Geneva, which was summarized in a great article in the Economist this summer about Chains of Gold. According to Mr. Baldwin, cheaper communications allowed firms to manage supply chains over ever greater distances. Companies discovered they could build plants in cheap locations, ship components there to be assembled and export the finished product around the world. While the first unbundling separated producing markets from consuming markets, the second broke up production entirely across long, multinational supply chains.
And, in addition to a much faster rate of industrialization of developing and emerging economies, you now have supply chains that are increasing in complexity by the quarter where a single component may be exported several times, adding to tallies of gross trade but not to measures of value added. We have a plethora of Pakled emerging markets that now merely “borrow” technology from rich-world firms, who are incented to limit technology transfer out of fear of theft and unexpected competition.
But supply chains are maturing. As per the article, evidence suggests that supply-chain trade may have declined less and recovered faster than overall trade during the financial crisis, which is promising. So maybe you’ll get that complexity under control after all!