$4.6 trillion of trade flows could shift to other countries in 5 years
$4.6 trillion of trade flows could possibly shift between countries in the next 5 years, said Knut Alicke, partner at McKinsey & Company, during the virtual Supply Chain Europe Conference, organised by Reuters Events.
This is not certain but reflects the impact the coronavirus has had and what another crisis might do to the global economy. McKinsey & Company expect to see more supply chains shifting to regional and local operations. This however will not happen overnight as firms need time to prepare. It might happen when there is a new tender process and when companies have to evaluate their relationships with current suppliers.
According to Alicke major disruptions happen every 3,7 years and not being prepared could raise significant problems At the same time many organisations in the supply chain are only aware about what their Tier 1 suppliers do and have no visibility down the line.
“Companies need to understand their exposure and overall footprint,” explains Alicke and continues: “They need to know where they have inventory and where they don’t.” The expert pointс to the fact that previous crises have been more regional but the pandemic has affected everyone badly. The implications of not evaluating the network could not be very clear until something happens and depends on current trade rules. Regular stress testing is essential as well as targeted actions that can reduce vulnerability.