Globalization is over predicts Chamath Palihapitiya.
In a global world, "supply chain shocks are usually impossible to predict but happen with frustrating regularity," writes McKinsey. Recently it's been the pandemic, the massive Ever Given cargo container ship stuck in the Suez Canal, and the head-spinning changes in global customs and foreign regulations. According to McKinsey research, companies experience at least one month of disruption every 3.7 years, eliminating 45% of one year's EBITDA over a decade.
Chamath believes instead of just in time, that companies need to focus on resiliency.
The risks to global supply chains are massive.
Countries will sanction, borders can close, and the world is at risk of future environmental disruptions.
According to USA Today, "the cost of blocking shipping for almost a week through one of the most crucial waterways on earth apparently comes in at right around $1 billion." Supply chain risks are real, and always will be:
Logistical bottlenecks
Cyberattacks
Interstate conflict
Extreme weather
Water crisis
Catastrophes
Governmental collapse
National governance failures
Labor shortages
Failure to adapt to climate change
Data fraud and digital theft
Regulatory sanctions
Taxation changes
Import/export customs changes
The sea of endless risk is real— the goal of any company that utilizes a global supply chain is to think through these risks and mitigate them.
There are many rewards to a global supply chain.
In today's world, global supply chains are fragile.
That doesn't mean companies can't benefit from globalization with the execution of a better plan. Large manufactures are seeing the inherent risk of manufacturing 100% of their product in China (or enter any other country), but it still has its "perks."
With a global supply chain, companies benefit from:
Better reach.
Lower costs.
More customers.
More knowledge.
The goal of any company is to decrease its downside.
Think through your top global supply chain risks. What would have the most significant impact on your company and customers? Then begin to think and execute plans to mitigate those risks.
The goal, as Nassim Nicholas Taleb writes, is to be Antifragile.
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