Did Janet Yellen ring the death knell on globalization? Standing in an industrial park in South Korea last summer, the US Treasury Secretary called on companies and governments to rethink their global supply chains and trade flows to prioritize allies and trusted partners. Since then, the idea of 'friend-shoring' has been espoused by politicians, trade organizations and policymakers as geo-political risks change the dynamics of supply chain strategy.

“Working with allies and partners through friend-shoring is an important element of strengthening economic resilience while sustaining the dynamism and productivity growth that comes with economic integration,” Yellen argued.

Supply chain managers shuddered. For years, the mantra of supply chains had been lowest-cost and lowest-inventory. Private equity had wicked every drop of capital out of the process. Just-in-time was all about keeping supply chains and inventory as tight as possible.

And then COVID-19 happened. And Trump's trade wars. The Russian government invaded Ukraine. Cracks started to appear in global trade agreements. And companies scrambled to secure their sources of supply, build up inventory and develop new redundancies. Investing into 'friendly' markets and suppliers suddenly seems like a smart idea.

This isn't just about securing supply chains. It's also about securing infrastructure. Governments increasingly recognize that their assets could be vulnerable to insecure supply. And they are taking a heavier hand in helping infrastructure owners decide where they can source key bits of kit from, and who they can work with to operate them.

The implications for global infrastructure players are potentially massive. Given the fractures now shattering the old-world order and the growing shift to temporary, issue-specific flexible alliances (see trend 1 for more on this), many may find it increasingly difficult to stay on the right side of their customers. With a raft of new supply chain transparency regulations being promulgated, secrets (trade or reputational) will likely be hard to keep.

As most supply chain managers know, it takes significant time, effort and investment to rework supply chains. Organizing around cost was fairly straight forward; organizing around the strength of one market's relationship to another is more challenging. There may be no simple decisions.

This year, expect to see infrastructure players start to rework their supply chains into more dynamic supply webs that form around security of supply. And don't be surprised to see some significant fallout as less-friendly markets and companies get dropped.



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