Global supply chains

A slow unravelling

Supply chains are undergoing their most dramatic transformation in decades. This will be wrenching for many firms, argues Vijay Vaitheeswaran

TOM LINTON, chief procurement and supply-chain officer at Flex, an American contract-manufacturing giant, has his finger on The Pulse. That is the name of his firm’s whizzy command centre in California, which is evocative of a Pentagon war room. The kit allows him to monitor Flex’s 16,000 suppliers and 100-plus factories, producing everything from automotive systems to cloud-computing kit for over 1,000 customers worldwide. Mr Linton is one of the acknowledged kings of the supply chain—the mechanism at the heart of globalisation of the past few decades by which raw materials, parts and components are exchanged across multiple national boundaries before being incorporated into finished goods. Ask him about the future, however, and he answers ominously: “We’re heading into a post-global world.”

A few years ago that would have been a heretical thought. The combination of the information-technology revolution, which made communications affordable and reliable, and the entry of China into the world economy, which provided bountiful cheap labour, had transformed manufacturing into a global enterprise. In his book “The Great Convergence”, Richard Baldwin argues that the resulting blend of Western industrial know-how and Asian manufacturing muscle fuelled the hyper-globalisation of supply chains. From 1990 to 2010, trade boomed thanks to tariff cuts, cheaper communications and lower-cost transport.

The OECD, a think-tank for advanced economies, reckons that 70% of global trade now involves global value chains (GVCs). The increase in their complexity is illustrated by the…