Adapting the Supply Chain to Protectionist Policies

Adapting the Supply Chain to Protectionist Policies

If a U.S. border tax was enacted some retailers that are big importers could see their net profits plummet by almost 80%, while exporters of manufactured goods could see their net profits soar by 50% or more.

The combination of the election of Donald Trump and the UK’s vote to leave the EU has caused an “unprecedented level of uncertainty about trade policies and their effect,” according to Justin Rose and Martin Reeves of the Boston Consulting Group in an article in the Harvard Business Review.

If a U.S. border tax was enacted the authors say that some retailers that are big importers could see their net profits plummet by almost 80%, while exporters of manufactured goods could see their net profits soar by 50% or more.

While companies are trying to refigure their supply chains they are encountering challenges. The authors explain.

For companies looking to produce in the United States, one of the most significant is the decimation of the U.S. supply base: The United States suffered a net loss of nearly 19,000 manufacturing firms between 2001 and 2015, according to our analysis of U.S. Bureau of Labor Statistics and U.S. Census Bureau data. Many sectors saw 30% to 50% of firms close their doors, which has added complexity to manufacturing in the United States. Of the major manufacturing sectors, only chemicals, food, and beverages and tobacco products saw a meaningful increase in the number of firms.

In order to create more resilient supply chains the authors suggest manufacturers should take these steps:

  • Evaluate your existing and future customer footprint and map it against your existing manufacturing and supply chain capabilities.
  • Analyze the total costs of supply for each alternative location.
  • Explore advanced manufacturing technologies and possibilities, especially flexible robotics and automation and understand how these change the equation.
  • Proactively try to rebuild your atrophied supply-chain ecosystems, if possible in conjunction with similar manufacturers and large customers.
  • Engineer your supply chains to be resilient to further shifts and instabilities in trade policies and exchange rates.

 

Read the full article in Harvard Business Review. 

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