Geopolitical Tensions and Their Impact on Global Supply Chains: A Deep Dive
In recent times cities and states have been witnessing increasing instances of political recklessness that could ultimately lead to supply collapse all over the globe, due to the such crosses politics becoming a norm. Having worked as a content writer for 10 years, I have developed the urge to break these intricacies more so as to bring comprehension to businesses, client states, and the consumers. This blog aims to address the concepts that surround the idea of political tension and how that can influence a supply chain all over the world.
What exactly do we mean by geopolitical conflict? There are a number of sources that can give rise to such tension, be it an invasion from a foreign nation, economic sanctions or even a lack of settlements. Understandably, when states are at war, goods are scarce for, many of the global exchanges are cut off which in turn alters the way in which international markets work, and trade is conducted.
Strikingly, the corona virus disease is what pulled back the curtains and revealed the ugly side of globalization, as such strength was challenged putting things into perspective and forcing every country to open its borders and leave safety measures aside. However, we know global power is the reason independent nations end up destroying economic ties. War was looming during the pandemic and the latest one was the russo-ukrainian war but not many assumptions could have been made.
Disruptions in international relationships and global power dynamics is without a shadow of doubt one of the most significant impact that gets realized in supply chains, such Disruptions tend to alter source of supply and a resultant geopolitical risk is created. Policies and regulations need to be made stronger during such tense times, even companies would need to make tough choices when deciding on sourcing, production and distribution. As an example, companies could change their current strategy about sourcing from certain regions and decide to strengthen other regions in order to limit risk exposure and therefore need to change. This kind of reallocation of operations usually ends up increasing costs and other factors as the new company rushes to find new sources of materials or company sites to produce the goods and services.
Geopolitical tensions customarily lead to the rise of protectionism. In pursuit of protecting their economy, countries tend to initiate tariffs and appropriate trade barriers. The impact of the US-China trade war is very relative as it saw tariffs imposed on a series of products all affecting both nation’s economies and trading partners. Such an approach to protectionism does not simply increase operational costs but also raise consumer cost, as more often than not companies transfer the increased cost to their buyers.
Apart from tariffs, sanctions are also one of the modulating factors in the management of global supply chains. A sanction is able to limit the game, and other necessary goods and services utilization and therefore its business firm heads to an intricate chain of legal regulation. For example, the Russian sanctions that emerged after the invasion of Ukraine significantly impacted energy supplies across many industries. Thus, especially during these time period, businesses need to keep the pace and adapt themselves to such shifts, because the non compliance will likely attract heavy fines and blemish the organization’s image.
While, business have been exposed to these daunting challenges, they have now been armed with tools to confront these difficulties. One of which is, supply chain visibility technology enabling firms to get updates about their products on a real time basis or provide updates on possible hoarding which might reduce the likelihood of any disruption. Similarly, through the economic avenues provided by the big data, firms are able to make informed decisions on the right location for sourcing and production, allowing them to respond faster to any political situation.
More so, companies have also started utilizing a risk management perspective of their supply chains. This ambition proposes to carry out a risk assessment to determine the possible weak links and possible strength enabling the formulation of plan B. Through seeking to be proactive rather than reactive to any outcome whether be a political trade embargo or an earthquake, firms are able to increase their chances of survival and reduce the adverse effects of any political conditions on their businesses.
Partnerships are crucial for businesses and countries to cope with relations between global economic players which makes them crucial. They can engage multisectoral suppliers and logistic decline who are like minded and support their goals. Further, these companies can contribute to networking and further enhance their supply chains by making them stronger. Also, communicating with governments and different organizations allows companies make decisions and take up steps that patently favor free trade and open markets and minimize the likelihood of geopolitical tensions.
As far as the future is concerned, it is quite apparent that the geopolitics will be at play when it comes looking at the supply chains which are global. Businesses have to be alert, applying measures that allow them to fit in to the companies operating in the fast dynamic environment. Being flexible, being creative, and having a risk strategy, which is forward necked and not passive, enables the firm to grow in this volatile environment instead of simply coping with it.
To sum up, it is quite evident that the relationship between the systemic conflict of various global powers and foreign supply chain is complicated to say the least. The problems abound, but so do the chances that organizations will be able to rethink their structures and overcome the hurdles. I as a senior content writer see that it is extremely important for every party to appreciate these dynamics so that we can formulate strategies aimed at a resilient and prosperous economy globally.
