Geopolitics are affecting supply chains – adaptability is a must.

Resilient supply chains required among geopolitical risks.

Businesses are called to strengthen their supply chains in today’s competitive, yet turbulent markets.

Geopolitical uncertainty is affecting the reliability of supply chains globally. Several geopolitical risks are at play in today’s operating environment, including health threats, climate change, war and tensions – all with the potential to cause varying disruptions to supply chains.

The effects of market disruptions are vast: raw material availability, logistics disturbances and cost fluctuations are just some of the many challenges brands need to consider on a daily basis. Due to this uncertainty, supply chain resilience is now more important than ever.

In an operational environment framed by instability and rapidly changing geopolitical risks, preparation is not easy. While each sourcing market has its unique risks and benefits, certain strategies can be applied across the board for supply chain resilience.

Preparation is key

Sourcing flexibility is at the core of building supply chains that are less susceptible to fluctuating conditions. The year 2024 has seen a significant trend of shifting focus from global to regional sourcing, ARC Group’s Sourcing Survey 2024 reveals. Geopolitical risks call for companies to revisit their resilience strategies and examine whether they are too dependent on certain routes, regions or partners.

According to ARC Group’s sourcing survey, nearly 80% of companies now diversify suppliers due to geopolitical risks. However, this is not always possible, and other approaches may be needed.

The importance of data is growing, allowing operators to make informed decisions based on real-time information. While technology has made consumers more knowledgeable and thus more demanding, it also provides tools for anticipating disruptions and increasing transparency in supply chains.

Sourcing Challenges Across Europe, China, and Southeast Asia

The global sourcing landscape has undergone dramatic shifts over recent years. The COVID-19 pandemic, coupled with escalating geopolitical tensions, has forced companies to rethink their sourcing strategies. Here's a closer look at the current situation:

• Europe: Once a dominant sourcing hub, Europe faces challenges from an ongoing energy crisis and proximity to regions with heightened geopolitical tensions. These factors have somewhat diminished its previous edge.

• China and Southeast Asia: While these regions remain key players, the pandemic exposed vulnerabilities in reliance on single-source strategies. Many businesses are now exploring diversified sourcing to enhance resilience.

Looking ahead, companies must balance regional risks with strategic flexibility, ensuring supply chain stability amidst a volatile global landscape.

Stay tuned!

Reshaping supply chains in the changing geopolitical landscape calls for entirely new ways of thinking. Remaining vigilant and evaluating market-specific factors is crucial for finding the right strategy for each business.