While some of the more advanced procurement organizations that we know and work with have reached the “devolution” phase of maturity – i.e., centralized support and enablement but with localized, decentralized execution and capability – the general linkages of global supply chains is a trend that is likely not to reverse itself. Even as companies localize supply chains rather than center global sourcing efforts from an export perspective, interconnectivity between countries and organizations is rising, not falling. For companies that are increasingly “sourcing locally,” the underlying sources of supply for lower-tier materials, semi-finished goods and ingredients are becoming more reliant on global sources. And, many commodities are largely influenced globally (e.g., China as the bellwether for metals) rather than locally.
With this in mind, DHL’s academic, yet outstanding Global Connectedness Index should be required reading for those with any sort of global orientation or interest within supply chain and procurement. Authored by professors Pankaj Ghemawat and Steven A. Altman, the free study is in a league of itself (and does not even require registration to download, which makes this giveaway from DHL even more surprising).
According to the authors, “This year’s edition … has been … refreshed to reflect changes in 12 types of cross-border trade, capital, information and people flows – or stocks cumulated through past flows … The updating indicates that globalization depth began growing again, albeit at a modest rate, during 2013, after its recovery stalled during 2012. However, globalization breadth – which other globalization indexes ignore – continued its multiyear slide.”
For those curious about the depth of the report itself (don’t dive into it without an hour to spend just scanning it or reading the highlights), it truly “documents and dissects these patterns, both at the global level and for 140 countries and territories that jointly account for 99% of the world’s GDP and 95% of its population. And, as an enhancement, it also uses techniques developed for ‘big data’ to visualize some of these patterns at a global level.”
DHL’s Global Connectedness Index represents an outstanding body of work – one that we’ll dig into some of the highlights of (and what it means for procurement and supply chain functions) in the coming weeks. As we go through this material, it is important to remember that the interconnectivity within our supply chain that we do not necessarily know about (e.g., lower-tier suppliers) introduces risk more than it does opportunity. The more we can map interconnectivity through specialized solutions, the greater we can expand procurement’s influence.