Pandemic pressures have prompted a major rethink of supply chain structure, according to Scott Price, president of UPS International.
With continuing strains on long-distance routes due to fluctuating consumer demand, and disruptions to airlines and shipping, the company has acknowledged a push towards regionalisation.
“One of the reasons [regionalisation] accelerated is companies were surprised how little optionality existed during this period,” Price told the Financial Times.
The important thing for these businesses is reducing vulnerabilities exposed by the pandemic.
Credit: Austin Zhang
For multinational businesses, this means thinking strategically on where the best place is to set up manufacturing and assembly so that they are less dependent on “stretched” supply chains.
It also means turning to regional markets: for example, Price cites factories in Asia which traditionally serve Western markets, but which may start looking closer to home.
It will take until 2025 for long-distance air travel to fully recover, according to industry estimates.
But Price says it will also take five to ten years for the push to regionalisation to really make itself known.
Source: Financial Times