Does a new globalisation mean rethinking our supply chains?

With the advent of new technologies, a changing geopolitical context and ever more pressing concerns about sustainability, are we seeing the emergence of a new form of globalisation?

At the IfM’s annual Cambridge International Manufacturing Symposium, leading industrialists, academics and policymakers came together to discuss emerging trends in global manufacturing, and whether the low-cost focus of previous decades is no longer the dominant design factor for 21st century manufacturing supply chains.

Dr Jagjit Singh Srai examines the current state of globalisation.

Stock - Connected Globalisation Connectivity Globe Smart Supply Chain Technology
The explosion of information and communications technology from the late 20th century has given us the means to connect across the planet as never before.

Globalisation, as we understand it today, has its origins in earlier industrial revolutions. The proliferation of railways and large trading ships in the 19th century allowed goods to be moved around the world at scale.

The explosion of information and communications technology from the late 20th century has given us the means to connect across the planet as never before.

Manufacturers have harnessed this global connectivity to achieve huge economies of scale in production, often building vast ‘pan-regional’ factories to meet growing customer needs and developing complex and extended supply chains to support them.

Losing its shine?

But globalisation has become something of a tarnished brand. Developing nations – while providing the low-cost labour that underpins the global economy – face seemingly insurmountable barriers to growing their own export-led economies.

Developed countries are also experiencing political volatility as sections of their populations feel increasingly excluded from the highly visible wealth-creating activities of a perceived global elite. We are seeing a political backlash in countries such as the US and the UK, with leaders looking to protect their industries and control their labour markets.

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There are other factors at play. Sustainability, although not wholeheartedly endorsed by all governments, is clearly an imperative for many, and for the majority of multinationals that need to respond to the concerns of their customers, staff and stakeholders.

And the big players in global manufacturing are taking their commitment to sustainability very seriously. At the Symposium we heard, for example, about Procter & Gamble’s ambition to ensure all its manufacturing sites are carbon neutral by 2020 and DHL’s Life Sciences and Healthcare Division’s commitment to be carbon neutral by 2050.

Squaring the circle

Customers around the world demand access to a ‘global inventory’, refreshed on a daily basis with new products that can be delivered to their door hours later.

But sustainability represents something of a paradox: customers around the world demand access to a ‘global inventory’, refreshed on a daily basis with new products that can be delivered to their door hours later. At the same time, they want large companies to reduce their environmental impact.

New technologies have the potential to square the circle. New production technologies mean we can envisage different ways of organising the movement of goods around the world.

Distributed manufacturing can enable the production of goods close to the customer, in small factories with smaller supply chains delivering more personalised products and services at a lower cost to the environment.

Digitalisation can also support the ‘circular economy’, from smart design, fostering collaboration through to data sharing across supply chains, monitoring usage to prolong life and managing re-use.

However, the scale of change needed to shift the manufacturing paradigm from large-scale global operations to more local-to-market ‘distributed manufacturing’ is enormous. But there are perhaps grounds for optimism as large global companies – driven in many cases by the triple bottom line of social, environmental (or ecological) and financial – are trying to embrace the opportunities the Fourth Industrial Revolution presents.

Innovation – the way ahead

Our speakers at the Symposium reflected many of these challenges: an understanding that they must innovate or die. They all have programmes of digital innovation and experimentation underway. In this world of fast-moving technological and social and political change, trying new approaches, seeing what works, capitalising on success and moving on fast from failure is the only way forward.

But many of the global behemoths – while they can see change heading towards them at speed – may not have the organisational capability to manage the disruption it will bring. Being able to embrace innovation will be key – but it is not easy. Even those large companies that think they are good at working with innovative start-ups present an impenetrable carapace to would-be collaborators. 

Cambridge International Manufacturing Symposium
Cambridge International Manufacturing Symposium – This annual Symposium is a forum for industrialists, policymakers and academics to address the challenges and opportunities facing global manufacturers in this rapidly changing world. In 2017, we were delighted to welcome keynote speakers from: LSHC DHL Supply Chain, Grundfos, GSK, Procter & Gamble, United Nations Conference on Trade and Development, World Economic Forum.

Skills

A lack of skills is also part of the challenge facing organisations, particularly but not exclusively in the boardroom. World Economic Forum analysis suggests that companies and governments need to think about completely different models of employment that allow people to reskill throughout their careers.

The skills gap is widely acknowledged to be a barrier to digitalisation, but the solutions tend to focus on educating new entrants. While educating the next generation is clearly vital, so is developing a lifelong learning approach for staff at every stage of their careers. 

The effect of technology

Beyond the skills challenge, another key theme is the role of technology in future supply chains. To what extent will new technologies drive efficiency gains as part of a technology push dynamic, focusing on cost improvement and productivity?

Or will future supply chain business models drive new ways of meeting consumer needs, with the supply network design agenda shaping technology development programmes?

The challenge here is that these new supply solutions are not going to be easily arrived at in the traditional functional silos within which large organisations operate. They will more likely involve multi-functional technology and business-savvy teams spanning organisations.

Whichever of these dynamics play out, the days of the large monolithic factory operation, churning out standardised products at global scale, located far from the point of consumption seems increasingly at odds with the recent trends for more customised goods, shorter lead times and greater scrutiny on the provenance of the product.

Indeed, the triple bottom line analyst’s approach, now being used by many organisations, will demand that social, environmental as well as financial criteria are met. Sound labour and environmental practices and resource efficiency in product manufacture and supply will drive change. Increased visibility and transparency will enable the ethics of alternative supply arrangements to form part of the new assessment criteria informing sourcing and supply decisions.

These challenges – while not altogether new – will shape developments in the footprint of future manufacturing supply chains and will require the attention of industry, governments and academia as we all try to accelerate the shift to a new kind of manufacturing – one that will deliver economic and social value while safeguarding the world in which we live.

Dr Jag Srai, head of IfM’s Centre for International Manufacturing, The University of Cambridge
Dr Jag Srai, head of IfM’s Centre for International Manufacturing, The University of Cambridge

IfM short courses for supply chain strategists

Making the right things in the right places: 28 February 2018

Learn how to take a structured approach to reconfiguring your company’s international footprint of manufacturing activities, in this one-day intensive course – bit.ly/2yawoZO

Developing end-to-end supply chain capability: Wednesday 23 May 2018

This course gives insight into the key elements of design, development and implementation of the processes that will deliver end-to-end supply chain capability within your organisation – bit.ly/2y9omAy