A claim in the Financial Times (10th August) that manufacturers are abandoning global supply chains for regional ones has come in for a stinging rebuttal from one of the industry’s heavy hitters.
Alan Braithwaite, chairman of LCP Consulting and visiting professor at Cranfield, pictured, said: “Today’s assertion that companies will be returning their supply chains from a global model based on Asia, and specifically China, in favour of a more regional model is exaggerated and incorrect.”
The FT article argued that companies are increasingly looking closer to home for their components, meaning that for their US or European operations they are more likely to use Mexico and eastern Europe than China, as previously. It quoted Philips chief executive Gerard Kleisterlee as saying: “A future where energy is more expensive and less plentifully available will lead to more regional supply chains.”
Braithwaite argued that WTO statistics show that the majority of world trade is regional rather than transcontinental. So the scale of any return is unlikely to be significant.
“Furthermore, the forecast shift was also predicated on the reported ‘fact’ that manufacturers’ carbon footprints are as much as 70 per cent related to transport costs. This implication of emissions as a driver of change is unsound. Work done for the DfT by Cranfield University in partnership with LCP Consulting showed that long distance regional supply chains by truck are more carbon intensive than long distance sea transport by container.
“In addition, research by LCP on the measurement of carbon footprints for specific supply chains, compliant with ISO 14040, points to emissions arising from supplies and manufacturing as being at least as important as any consequential transport and logistics costs.”
Braithwaite said that some companies had off-shored supply to an extent that they now regretted. “However any shift back will be based on a specific cost-benefit-environmental analysis rather than a structural migration,” he said.