With the pandemic sending disruptive waves through every aspect of our personal and professional lives, it’s probably been challenging for you to simultaneously track with geopolitical and global trade implications to your payments or finance departments. Two years ago I wrote Next on the World Stage: Nationalism, Brexit and an Escalating U.S.-China Trade War, and it’s time for an update. With such large-sweeping movements on these global issues in the past two years – conflated with the pandemic – there are critical repercussions that you should consider.
Good, bad or indifferent, ever-changing dynamics require that your organization actively gather and analyze data and gain visibility into all aspects of your procure-to-pay process so you may build resilience and inform future decisions within your organizations. And the time to act is now, as the world will not stop spinning. Averaging across industries, companies can now expect supply chain disruptions lasting a month or longer to occur every 3.7 years, and the most severe events take a major financial toll, according to McKinsey. Let’s dive into four trends making lots of splashes right now.
New and different country allies
Friend or foe? It’s hard to know these days. With Brexit in the United Kingdom’s (U.K.) rear-view mirror and several “foes” in Europe as a result, it is searching for international trade deals. For example, they have the green light to start the process of joining the 11-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”). Plus, New Zealand is strengthening ties with the U.K. rather than the U.S. And all this is on the heels of the U.K. and Australia inking a free trade deal.
Goodbye London & hello Paris?
Along with ally shifts comes hub moves. JPMorgan, which had long used London as its European Union (E.U.) gateway, is just one of the many firms to establish its trading center in Paris post-Brexit. New Financial think tank said in a report in May that Paris had attracted 102 of 440 firms from Britain that opened units in the E.U., second only to Dublin’s 135, according to Reuters.
High tariffs=high costs=tough decisions
In retaliation to U.S. tariffs, China has placed tariffs on more than $110bn of U.S. products, according to the BBC. It’s no question that much of the world – not just the U.S. – is reliant on China. For example, 75% of all semiconductor chips are produced in east Asia, according to the Semiconductor Industry Association. We’ve obviously found ourselves in a global shortage due to the pandemic and the friction between the U.S. and China. Meanwhile, the higher input costs on many other goods continue to force businesses to make tough decisions – like cutting costs or finding new suppliers. The U.S. China-trade war, while improving slightly, will likely not end anytime soon. The U.S. and China entered phase one of the reparation agreement, but they have not set a concrete date for phase two.
Supplier shuffles
On the domestic front, President Biden recently requested a review of U.S. supply chains, which found that U.S. supply chains are not resilient or secure enough and need to be fixed. The report notes the following measures: encouraging domestic production capabilities, working with allies to secure and diversify supply chains, and investing in worker training and research at home and abroad. One could guess the elephant in the room for this report. See point three. Perhaps your organization is one that will nearshore your operations?
Look into your crystal ball
So, how do you prepare for and manage these constant shifts? Visibility. And visibility starts with capturing 100% of your data. Then, you pull out your crystal ball – an automated procure-to-pay solution – which allows you to analyze, understand, predict and pivot operations in reaction to these uncontrollable forces that can cause major supply chain disruption.
Imagine knowing all your suppliers, where they’re located, where you are vulnerable, where your organization is most exposed, and more so that you can source other options to get the materials you need to produce your goods and hit your deadlines. Visibility via automation is the only solution to stay competitive in today’s world of constant disruption.
