Global becomes local as recession is felt

The revision is happening, the study finds, as markets contract worldwide and the complex global supply chains, built out in the years of plenty, become too expensive to sustain.

The research, conducted by international research house Frost & Sullivan and initiated and sponsored by global supply chain Barloworld Logistics, surveyed over 250 medium and large SA businesses this year. It found that one key objective in the short term for all businesses is procurement optimisation.

In the 2008 edition of supplychainforesight, focused on the so-called “complexity masters” - those companies globalising their supply chains most successfully - around two-thirds of the entire sample of companies surveyed - professed to have some component of their supply chains elsewhere in the world. This was ample evidence of the explosion of the globalised economy.

Short-term objectives

By stark contrast, in an accompanying set of interviews with C-level executives in different industries for this year's research, the study shows the tide has definitively turned in terms of short-term objectives.

SA C-level executives are now focused on such issues as:
• Local events
• Localising the inbound supply chain
• Rail-transportation feasibility
• Physical security of goods in transit.

As can be seen from these factors, peculiarly South African conditions appertain, such as cargo security and the physical logistics infrastructure. These have never disappeared, but in a recessionary environment in which localising supply represents a viable cost-reduction approach, they have become burning issues.

The extent of the move away from global to local is indicated in the general research by the finding that other factors, such as supplier selection and inbound transportation optimisation, are all fairly prominently indicated among short-term objectives. There can be no doubt that the recession has refocused attention on sourcing supply locally. This is a double-edged sword of course, as it exposes businesses to the risk of unreliable supply lines, a lack of skills in manufacture, and increased costs.

Johan Dekker, Barloworld Logistics spokesperson on the research study said, “The move away from overly risky global supply chains is understandable, but complete localisation is probably not feasible in the longer term, certainly not without the necessary local skills and infrastructure. It's a crucial issue for SA's national economy.”

A free copy of the final report is available for download from http://www.supplychainforesight.co.za, or go to the Barloworld Logistics web site: http://www.barloworld-logistics.com.