Supply Chain Localization Rarely a Priority: Our Continued Analysis of DHL’s Global Connectedness Index (Part 3)

One of the somewhat surprising trends in DHL’s Global Connectedness Index is that “advanced economies have not kept up with the big shift of economic activity to emerging economies.” This might seem surprising on the surface – increasingly larger companies are mobilizing localized supply chains to serve regional global markets. Yet the question remains: Are we doing it enough? Without it, we face a “declining breadth of global connectedness,” and “counteracting this trend would require more companies in advanced economies to boost their capacity to tap into faraway growth.”

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Another somewhat related and scary trend (at least from a supply risk perspective) is that we’re not necessarily as localized as we think we are in certain markets. Specifically, “a decades-long trend toward trade regionalization has gone into reverse. In fact, every type of trade, capital, information and people flow measured on the DHL Global Connectedness Index stretched out over greater distances in 2013 than in 2005.”

Effectively localizing supply chains requires not just feet on the street, but commitment longer-term (i.e., the opposite of what became of most low-cost country sourcing efforts 5-10 years ago). From where we sit interviewing and working with CPOs and heads of supply chain, this type of localization, while important, is rarely a top priority, compared with managing and reducing costs and inventory. But perhaps it should be.

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