top of page

Evolution of the Global Supply Chain

Amidst political winds, true changes in the nature of globalization can easily get overlooked. Globalization drastically transitioned in the mid-2000s, where physical goods became less trade-intensive. Though it is true that output and trade continue in growth (in absolute terms), a smaller percentage of goods off the world’s assembly lines is now traded across borders. Surprisingly perhaps is the decline from 28.1 to 22.5 percent for exports in chains for physical goods. On the other hand, cross-border services increased over 60 percent faster than trade in goods and generate disproportionately larger economic value than traditional macroeconomic statistics could lead to believe. National statistics attribute 23 percent of all trade but if value added services contribution to exported goods, sending of intangibles companies sent to foreign affiliates, and free digital services for global users are considered, this share increases to more than 50 percent of all trade. At the same time, global value chains require an increasing amount of knowledge and therefore become more reliant on high-skill labor. Chains of physical goods are increasing in regional concentration; companies are building production facilities in close proximity to where they find demand. This is especially true in Asian and European markets.

The reason behind the trends are interlinked and complex but can be traced back to several factors. Emerging markets are gaining an increasing share in global consumption, reaching roughly 50 percent over the past years. Those economies in turn are developing comprehensive domestic supply chains, reducing reliance on imported intermediate goods. Additionally, global chains are reshaping due to data flows through countries and the implementation of new technologies.

Keith Knutsson of Integrale Advisors commented, “many misconceptions exist regarding the state of global operations and logistics. In this new landscape of complex unknowns, flexibility and resilience might have never been more critical.

Featured Posts
Recent Posts
bottom of page