A major shift in global supply chains is underway, and emerging markets are scrambling to take advantage of the shift
Logistics challenges weighed on global economic growth in 2022.Emerging markets are investing to capitalise on shifting supply chains.Macroeconomic forces such as inflation, geopolitical tension punctuated by Russia’s invasion of Ukraine and spikes in commodity prices heightened supply chain disruptions in 2022, which included capacity constraints, higher freight costs, labour shortages and port slowdowns.
While a trade slowdown should help alleviate bottlenecks in supply chains, the advent of new strategies to mitigate them – including diversification of suppliers, reshoring, near-shoring and friend-shoring – means that supply chains are still shifting. Since 2020 many businesses and governments have pursued a so-called China+1 strategy, diversifying their production capacity by setting up operations in other countries while still maintaining a significant presence in China.
Bangladesh, India, Malaysia and Thailand have also replaced China in global supply chains, underscoring the strength of East Asia’s performance in 2022.the US would look to Latin America to meet its manufacturing and imports needs closer to homeAfter ranging between $30bn and $35bn in 2021, Mexican monthly imports to the US surged to all-time highs in 2022 of $37bn-41bn. China has even sought to invest in manufacturing facilities in Mexico to skirt US tariffs and cut delivery costs to the US.
Digitalisation is already helping ports and the shipping industry to improve efficiency, streamline the processing of documents through e-documents and electronic payments, and create more abundant information flows in warehouses and manufacturing facilities so that artificial intelligence programmes can be trained to prevent bottlenecks.
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