Global Supply Chain vs Regional Supply Chain

Globalizatation has almost reached its peak in last decade and since the start of recession there has been a lot of talk on whether globalization will survive the new wave of protectionism specially which is done by western governments to stabilize their economy and improve their job market.

Another interesting aspect coming out from study of Globalised supply chain is that it is becoming very complex. It is becoming increasingly difficult to identify the true cost of the product (in cases Tier 1 and Tier 2 suppliers are placed across the globe), the benefits of having a globalised supply chain and overall risks associated with a global supply chain.

Due to these factors companies are now pushing for much simpler and near shore supply chain so that risks associated (in terms of cost, delivery and quality) with the supply chain can be managed easily. Procurement Leaders recently ran an article “Regional procurement the new globalisation”. The article quoted , Dan O'Regan , head supply chain of Ernst &Young as saying that "I think you will find smaller, more regional supply chains”. The same view was supported by CEO of Philips Gerard Kleisterlee.

But the fundamental question is that whether environmental issues or economic issues can force companies to abandon their Global Sourcing objective. Especially when companies across the globe have invested so much in building infrastructure for it and moving away from Globalised setup to regional setup will diminish the benefits of economies of scale achieved (by the companies) by integrating their supply chain.

The answer to the question remains a tough one to decide. There are lots of benefits of smaller supply chain as it gives increased visibility to spend, less cost to manage and more control while global supply chain provides better leverage in term of volume, access to wider supplier base and best cost across the globe. In my view the idea of globally connected supply chain is still economically superior to abandon in a hurry.