Does supply disruption mean we're moving to a new economic order?

5 April 2022

Global warming, decarbonisation, and the Ukraine war may force companies to “completely reconfigure” supply chains, a professor has warned.

Alan Mckinnon, professor of logistics at Kuehne Logistics University, said we could be moving towards a “new economic order” with a more localised model.

“The feeling is that the economic order that has been in place for the last 30 years, which has underpinned globalisation, is breaking down. We see that in the case of the current Ukrainian crisis,” he said, speaking at Logistics UK’s first annual Supply Chain Resilience Conference.

“This will change the nature and scale of the threats to our global supply chain, because if we’re moving into a new world, we are going to have to completely reconfigure our supply chains. There will be a lot of strains and stresses in that process and that will be disruptive in the shorter term.”

McKinnon said globalisation, trade liberalisation and the internet had stoked up geopolitical tensions and impacted supply chains, effectively “weaponising connectivity”. He said countries threatening to stop the supply of critical materials could become a surrogate for military action.

Separately, Paul Wellener, vice chairman of US industrial products and construction leader at Deloitte, said reshoring and nearshoring were a potential response to global disruption.

Speaking to Yahoo Finance about reshoring and nearshoring trends, he said: “They got started even a decade or so ago when we had the Fukushima nuclear accident. We’ve had issues with tariffs over the years. We’ve had weather-related disruptions. And we even have the war going on in Russia and Ukraine. 

“There’s a lot of things that have disrupted supply chains, so manufacturers are thinking about, how can they mitigate risk? One way to mitigate risk is to bring things back to where they have a little more control over the supply chain, bringing some of those things onshore. 

“It’s going to exacerbate the problem with the number of jobs at the moment that we need to fill here in the US. But in the long term, it can provide a lot of security to many of the organisations and bring those jobs back into the domestic marketplace.”

The war in Ukraine has impacted commodities including wheat, sunflower oil, and gases.

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