After a historic year in which disruptions from the COVID-19 pandemic, ongoing geopolitical conflicts, and elections are currently being held in more than 60 countries, supply chain managers face increasing challenges. facing.
“In fact, I would say we have entered a new era,” Marissa Adams, head of global trade solutions at HSBC Americas, said in a video interview with Yahoo Finance. “I don’t think there’s going to be normality anymore. I think what businesses are facing now is that supply chain disruptions have become the new normal.”
Supply chain disruptions have always been a part of global trade, dating back to the Silk Road, which connected trade routes in Europe, the Middle East, and Asia. However, companies in today’s markets are often exposed to unexpected global events, which affect their ability to conduct effective transactions.
Several factors are putting pressure on global supply chains this year, according to a new report from HSBC. Products and global supply chains are more complex than ever, and suppliers need to secure financing in an inflationary environment.
There are also challenges specific to certain geographic regions, such as attacks in the Red Sea or droughts affecting the Panama Canal, causing ships to reroute. And globally, more than a quarter of the world’s population will vote this year.
“Certainly trade continues to be a big theme in the campaign,” Adams said, adding that “part of that is due to protectionism and nationalism (and) other focuses.” .
A cargo ship sails through the Panama Canal on June 13, 2024, as authorities increase vessel traffic through the waterway due to drought-related restrictions. (AP Photo/Matthias Delacroix) (ASSOCIATED PRESS)
Overall picture of the supply chain
Adams said the coronavirus pandemic has sounded a wake-up call for companies exposed to geopolitical events and other vulnerabilities. Up until now, companies have built supply chains primarily focused on cutting costs and increasing profits, Adams said.
“We’ve moved from a world where goods are delivered ‘just in time’ and people are now thinking ‘just in case,’ and that’s why many companies are “We have significantly changed our balance sheet.”
As companies seek to move operations closer to home, increase security, and reduce supply and delivery costs, supply chain strategies have evolved to meet these new challenges.
“The first thing that companies can consider is… really digging really deep into their supply chains,” Adams said. “Where do they see the risk? Are there specific suppliers that they are focusing on, or are there countries where there is potentially more risk?”
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Mr. Adams also provided guidance for managing relationships with China’s business sector amid the Biden administration’s recent tariff hikes, reminding companies that they need to consider potential risks holistically rather than country by country. He pointed out that there is.
“The supply chain is complex, and even though something is produced here in the United States, many different parts are produced in Asia, Europe, and other markets around the world,” Adams said. “What we try to tell our customers is to look at risk holistically. Don’t just look at one category of product. Is there?Are there any transportation risks in other countries?
President Joe Biden sits down May 14, 2024, to sign a document imposing massive new tariffs on imports from China. (AP Photo/Susan Walsh) (ASSOCIATED PRESS)
When asked how supply chain issues could impact investors’ portfolios, Adams pointed to three signs investors should be aware of.
First, look at the strategy of senior leaders, she said. Does your CFO regularly talk about supply chain resiliency? Focusing on both risk and cost?
Second, how concentrated are companies in key sectors and markets? For example, much of the semiconductor production is based in Taiwan, but many companies are looking to move those operations to the United States. However, it takes time.
Finally, Adams noted that investors need to evaluate a company’s infrastructure investments and whether the company is diversifying its investments in its supply chain to avoid unnecessary risks.
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