Geopolitics is Shaping Supply Chains & Trade

👉9 in10 Supply Chain Executives are adjusting sourcing and manufacturing locations

👉A survey finds that supply chains are working with more suppliers as companies shift their global strategies to meet a world transitioning towards protectionism and geopolitical instability. According to the Trade in Transition global survey of more than 3,500 supply chain executives:

📌75% reported that they are working with more, not fewer, suppliers

📌41% said that emerging technologies will increase efficiency and visibility
📌88% of organizations are geographically reconfiguring supply chains
📌46% are pursuing diversification
📌22% are enacting nearshoring and regionalization, transferring a business operation to a nearby country, rather than a more distant one
📌20% are reshoring (bringing production or manufacturing back to the country of origin, previously outsourced to other countries.

Companies have become more risk-aware over the last decade and the changing geopolitical environment has meant that there is a higher prioritization of reliable sourcing partners, especially as firms appear to continue to worry about maintaining cash flow in a higher interest rate environment, meaning they cannot increase inventory buffers.

What does it mean for sourcing

✅Suppliers must demonstrate consistency, quality, and timely delivery to become preferred partners. Many firms are prioritizing reliable sourcing partners rather than maintaining large inventory buffers, partly because of economic pressures.

✅Suppliers must position themselves as reliable and adaptable partners to attract business from companies reconfiguring their supply chains.

✅Businesses are not retreating from international trade but are stepping up to the challenge,” with 20% hopeful that new trade agreements will lower tariffs and trade barriers even with the direction of geopolitical

✅Leaders are recognising the importance of countries perceived as non-aligned or neutral, with the research highlighting Brazil, India, Mexico, Vietnam, and the UAE. 71% said these provided “stable and diverse trade, economic and investment (FDI) opportunities

✅As companies diversify, nearshore, or reshore their supply chains, suppliers may face shifts in demand based on their location and proximity to clients. However, with companies working with more suppliers, this creates increased opportunities for new partnerships.

The survey perfectly shows how the geopolitical landscape is shaping trade, supply chains. Near shoring, friendly shoring are real. And it becomes evident that companies with effective Supply Chain Risk Management with AI support and openess will be best placed to win in this new chapter of globalisation.

Source: Reuters, 1/22/25