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Supply chain

What the politicization of supply chains means for managers

IbyIMD+ Published 20 August 2021 in Supply chain • 3 min read

Without clear economic incentives, companies are unlikely to invest in supply chain resiliency; governments looking to address inflation and foreign policy should take note, says Richard Markoff 


Supply chain is mainstream

It’s been a dizzying 18 months for supply chain management as it became part of the global conversation. From COVID-induced shortages to the Suez Canal blockage, via semiconductor bottlenecks and container imbalances to saturated ports, supply chain management has even made the front page of the New York Times. 

But recent events have taken pushed this issue one step further. Supply chain is moving from the public sphere to the public policy sphere, where it sits at the heart of several current political and economic flashpoints. 

The Ever Given, the container ship that blocked the suez canal for 6 days
The Ever Given, the container ship that blocked the suez canal for 6 days

Supply chain inflation

As inflation rises in the US, some economists and politicians in there have  concerned themselves with what it might mean for medium-term economic prospects. Other economists, however, have been making the point that any observed inflation increase is largely transitory, and the blame lies with supply chains. One element to this reasoning is that the disturbances in global shipping have led to increased container shipping costs, with some estimates pegging the impact at 0.5% of the 5.4% annual US inflation.  

Another cornerstone of this argument is the underlying inflation drivers. These included one-time supply issues in items such as used car prices, which have exploded in part because the semiconductor shortage has hampered new car manufacturing supply, and lumber, where demand spiked due to pandemic-fueled improvement projects. 

The result is that supply chain capabilities are now, fairly or not, at the heart of critical policy decisions…

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