Surface Ripples

Eggs and Baskets

Russia cuts off Poland and Bulgaria’s gas supplies. Europe moves to block Russian oil imports.  Rather like the precipitous drop in supplies of PPE from China during the COVID crisis, we see another illustration of the risk of putting all your proverbial eggs into one basket.

Globalisation has its benefits: for example, the ability to centralise production in a country that can do it better/faster/cheaper (or all three) and exploit the process of just-in-time-delivery made possible by modern supply chain management techniques, ensuring ‘lean manufacturing’ with minimal raw material holdings and many more finished goods shipped faster from warehouses to wholesalers and consumers placing orders online.  

Jobs have been created in lesser-developed countries with lower labour costs or in countries with higher technological capacity/expertise, resulting (over time) in increased spending power and improvements in living standards.  Increased disposable income has created a new middle class with demand for quality goods, holidays and housing. 

However, those same benefits are now proving to be the Achilles’ heel of globalisation.  With many eggs in one basket, the results are beginning to speak for themselves.  Economies that offshore hand a potential strategic advantage to adversaries.

The choice is either to re-onshore production if one can (with increases in cost of goods manufactured in a potentially more ‘expensive’ labour force) or to accept the inherent risk of offshore production. Another choice is to diversify suppliers with the intent that if one is lost, the others can take up the slack. The coronavirus epidermic, however, proved the downside of this as almost every manufacturing country of any significance in the world found itself under siege from the epidemic as well.

As we have seen, when the world system goes down as it did with coronavirus, all these benefits come to nought.  We may well have to get used once more to a world that is more fragmented and expensive, but perhaps also more secure in certain respects.  The likelihood is that regional and trading alliances with become more, rather than less, prevalent.  Small countries that choose to ‘go it alone’ are likely to find themselves at a disadvantage.

I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management.  I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services.  For strategic questions that you should be asking yourself, follow me at @wkm610.

Labels: Crisis Management, Customer Care, Financial, Risk, Strategy

posted by William Martin @ 11:28