5 minute read 22 Feb. 2022
EY - Hong Kong Bridge with Container Cargo freight ship below

How to remedy supply chain issues: renew commitment to cross-border movement

5 minute read 22 Feb. 2022

The modernization and improvement of global mobility is key to restoring stability to global supply chains following the pandemic.

In brief: 

  • The pandemic has affected the stability of our global supply chains, leaving the world’s economy in a fragile state.
  • The challenges posed by the pandemic can only be solved by an integrated, cross-border approach to global mobility.
  • Increased focus on reliable vaccine certificates to the prioritization of supply enablement are some of the approaches available to remedying the impact to our supply chains.

The strains on global supply chains have been the focus of much scrutiny over the past many months. Governments throughout the world have unleashed more than US$11.5 trillion in stimulus spending over the recent term, providing fuel to the unquenchable demand to consume. However, the persistent impact of the coronavirus and its variants has compromised the reliability of international sources of supply, with undue strain on the planning, production and procurement of goods and services. This stress has contributed significantly to levels of inflation not experienced in decades. The world’s economy is more fragile as result.

A striking feature of the COVID period was a virtual shutdown of borders and a moratorium on travel. This reality was particularly impactful on the thousands of globally mobile professionals who are on temporary transfer in multiple countries. It was they, and their predecessors in assignment, who first built and then supported the global supply chains in locations throughout the world. 

Generations of investment in globalization had appeared to create a bedrock process of provision. And for the first several months of the pandemic, the supply chains held fast. Food continued to flow, parts moved and components continued to be brought together for end-user assembly. 

As time went by, weaknesses in the chains began to appear. The recent mania for so-called lean manufacturing and just-in-time deliveries was increasingly exposed. In the period just before the outbreak, the average S&P company was reported by The New York Times to carry only 66 days of inventory. Apple, which relies on components from no fewer than 49 countries to produce its products, had relentlessly driven that number down to nine days by the spring of 2020. Moreover, many companies now routinely depend on hundreds of suppliers, often scattered across the globe, for the components of their production and the reach of their services.

These approaches combined to expose the modern economy to harm from extended disruptions in global supply chains. As the crisis became prolonged, with ongoing restrictions on borders and mobility programs, this fragility was increasingly revealed. By the autumn of 2021, untended supply chains were fraying, with strains apparent in international procurement, component sourcing and freight movement. In October 2021, the International Monetary Fund reported that “border controls and mobility restrictions… have combined for a perfect storm where global production will be hampered because deliveries are not made in time, costs and prices will rise and GDP growth worldwide will not be as robust as a result.” One of the predictable results was the rise and resilience of inflation.

Resolving these and related challenges will not happen without an integrated, cross-border approach. The focus must return to facilitating the movement of skilled professionals to enhance, enrich and expand the supply chains forged over the past 40 years. Simply put, the presence and innovation of assignees are sorely missing, and business movement is necessary to restore the balance between stimulated demand and compromised supply.

Supply fatigue has been evident for the past many months. In response, many called to embrace what The Economist has called “a new [national] mantra of resilience and self-reliance”. A competing narrative insisted the security sought could best be achieved another way. True economic strength and confidence, these voices insist, comes from well-considered but diverse sources of supply. Over-reliance on any single source of supply — even one contained within one’s borders — is a risk. Rising political and economic tensions call out for diverse new sources of global supply, not a shuttering of international cooperation. Only through enhancing the global supply chains, balanced with appropriate local sourcing and stockpiling, can future prosperity best be served. The chains must be improved, adapted, and modified to address current and future circumstances.

To do so, we must address the present lack of support and investment in supply chain management. The absence of skilled mobile professionals has had a profound impact on the recent scarcity of all manner of goods and services. For better or worse, these chains are now akin to living things; they have been neglected for too long and the weakness is beginning to show.

How best, then, to advance this mobility-centric narrative? 

To unlink or newly link a chain, the forgers and blacksmiths must review and address their challenges on the spot. Of course, borders must be open for these professionals to cross; responsible deployment can only take place when there is more than a reasonable prospect for the health and safety of travellers and assignees. 

It is imperative that there be the issuance and distribution of reliable vaccine and health certificates. Such certifications will become an essential feature of international travel for the coming years. The objective is to confidently minimize or do away with the multi-day quarantine restrictions and multiple testing obligations. In the current economic and health crisis, we must significantly improve and accelerate safe movement. 

Equally, there must be a call for governments to jumpstart economies by shifting focus from demand stimulus to supply enablement. The challenge is to meet demand with reliable, assured supply, and to improve the delivery of goods and services from multiple locations before the inflation dragon erodes the impact of all that stimulus.   

Governments should prioritize measures designed to safely open borders to those dedicated to addressing requirements inherent in modernizing and improving supply chains. To adapt and modify the chains as required, we need to ensure that efforts to augment the mobility of professionals skilled in supply chain maintenance are supported. 

I foresee a coming period of supply chain triage, where several factors — responding to near sourcing pressures, sourcing crucial inventory stockpiles, shifting supply partners in the face of rising global tensions, addressing ongoing climate challenges and more — are addressed through purposeful modifications in supply chains. Talent, perhaps representing a new range of disciplines and seasoned by the experience of the past two years, is urgently required to be safely deployed and applied over multiple borders to address these and emerging needs. 

At first, the global supply chains by and large responded well to the COVID-19 pandemic. Before too long, however, ill attention to the obligations of the chains began to show. Demand was stimulated, but the means to support that demand was fragmented.

To best meet the challenges of restoring stable prosperity, we need to double-down on safe, focused global mobility. If we fail to do so, when the next challenge to globalization emerges, from whatever source, the voices calling for open, stable and sustained borders will be even more still and subdued than they are now.

Summary

Our global supply chains have been under strain due the pandemic. However, we can restore stability through an enhanced global mobility approach - including more reliable vaccine certificates, a shift on the focus on demand stimulus to supply enablement, and a commitment to addressing pressing issues that affect the modernization of supply chains.

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