Think Global Production and Supply Chains Are Shrinking? Think Again.

Disregard the talk about the end of globalization – it’s just getting started.

Parag Khanna | Bestselling Author

There’s an idea gaining credence in some circles that we’ve reached “peak globalization.”

If the advocates of this view are right, worldwide trade volumes – which enjoyed unprecedented growth but then stalled out somewhere around 2012, according to the IMF – are heading for a period of long-term structural decline.

The retreat, these trade pessimists claim, is driven by technologies like 3D and 4D printing, which allow manufacturers to produce things – including shape-shifting animate products – where customers need them, when they need them, eliminating the need for far-flung networks of suppliers and warehouses (and the long lead times and heightened uncertainty those extended supply chains entailed).

Contributing to the decline in global trade volume? Growing economic nationalism and trade protectionism in developed nations, including the United States and the United Kingdom.

It’s certainly one way to read the tea leaves. But in my view, it’s a misreading.

A new era of global growth

I believe we are entering a new era of synchronized global growth, driven by even greater cross-border flows – at least in those countries where anti-trade sentiment does not prevail.

Maps that show how the world is connected and how the global production and supply chain system works will replace traditional maps.

A world where companies with connected assets are producing connected products and employing pervasive data collection and advanced analytics not only increases their operational efficiency and the value of the goods they sell but deepens their relationships with their increasingly demanding customers.

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Who is going to position themselves to benefit from that expansion by becoming even more global?

In this second great era of globalization, continued economic openness – defined as an appetite for cross-border production and supply chains, an understanding of the maps that really matter and a grasp of the fact that you can’t retreat behind borders that have been breached digitally – will determine whether a company or a city or a country or an entire region is an economic success or a failure.

Simply put: The more connected a company or city or country or region is to the global flow of trade – either through physical or digital infrastructure – the more power and influence it will exert in coming years.

Because the question isn’t: Will global trade continue to expand? It will.

The question is: Who is going to position themselves to benefit from that expansion by becoming even more global?

Connected success

The good news is that digital technology – everything from the Internet of Things to cloud computing to block-chain software – is making it easier to coordinate the machinery of industry across vast geographies.

And the advent of smart, connected products is making it easier to service customers with supply and distribution chains that are more efficient, transparent, intelligent and yes, more far-flung than ever before.

Look at how companies like GE, Dyson and Foxconn are using embedded sensor networks to monitor – in real time – the quality, maintenance requirements and throughput of goods in and out of their facilities.

This makes them much more efficient. But as those leading manufacturers push their suppliers to adopt these smart technologies and as blockchain platforms like Elementum software become industry standard, it will become possible to monitor in real time the status of all your vendors – and of all your vendor’s vendors and of all their vendors, too.

Just getting started

That insight will take the complexity out of anticipating and managing potential supply chain risks.

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Supply chain complexity will become the new differentiator.

Wonder where there might be a disruption in your supply chain in the event of an earthquake or strike?

Software exists that allows you to run the query, get the answer and pivot profitably.

Supply chain complexity – rendered manageable with the help of technology – will become the new differentiator.

There are more incentives and more drivers pushing for the expansion of global trade and supply chains in the years ahead and fewer arguments for containing or shrinking them.

So disregard all the talk about the end of globalization. I think it’s just getting started.

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Parag Khanna is a leading global strategist and bestselling author. He is a Senior Research Fellow in the Centre on Asia and Globalisation at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He is also the Managing Partner of Hybrid Reality, a boutique geostrategic advisory firm, and Co-Founder & CEO of Factotum, a leading content branding agency.

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