S&P Global Unveils Insights on Future of Global Supply Chains in Latest Look Forward Research Series
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Insights
The projection of global trade to grow at a compound rate of 3.3% through to 2028, surpassing GDP growth, is a significant indicator of the increasing interdependence of world economies. This trend suggests that companies with a strong export component may see enhanced opportunities for revenue growth. However, the emphasis on supply chain expansion in Southeast Asia and emerging markets could lead to a realignment of trade routes and distribution networks. Firms that are agile and able to navigate these changes may gain a competitive edge, while those that are slower to adapt could face logistical challenges and market share erosion.
The report also touches on the implications of protectionist policies and resource-guarding for global supply chains. These factors can lead to increased production costs and create inflationary pressures that may compress corporate margins. Investors should monitor the potential impact on companies with international supply chains, as these could affect profitability and stock performance. Businesses that can mitigate these risks through strategic investments or diversification may be better positioned to withstand such economic headwinds.
Higher financing costs and the consequent reduction in firms' ability to invest in supply chain resilience is a critical issue. Companies are likely to prioritize strategies like reshoring and technology enhancements to mitigate risks and enhance profitability. This shift may lead to increased capital expenditures in the short term but could ultimately result in more streamlined operations and reduced long-term costs. Investors should consider the potential for these investments to drive efficiency gains and create value over time.
Furthermore, the workforce growth disparity between developed and developing economies could have profound implications for supply chain dynamics. Companies in industrialized nations may face labor shortages, while those in developing markets could benefit from a growing labor pool. This could influence decisions on where to locate manufacturing facilities and how to structure global operations, potentially affecting companies' scalability and access to talent.
The container shipping industry's challenge in financing its decarbonization efforts highlights a critical ESG concern. With shipping accounting for a significant portion of global trade by value, the industry's inability to shoulder the cost of becoming more environmentally friendly could have broader implications for global emissions targets. Companies that are proactive in addressing these challenges may not only avoid future regulatory costs but could also appeal to increasingly ESG-conscious investors. On the other hand, firms that fail to invest in sustainable practices may face reputational damage and potential divestment.
The report's insights into the strategic value of supply chains underscore the importance of ESG considerations in investment decisions. Stakeholders are likely to scrutinize how companies manage supply chain risks related to geopolitical tensions and climate change. Firms that exhibit strong ESG credentials, particularly in supply chain management, may be better positioned to attract investment and secure customer loyalty in an increasingly environmentally and socially aware market.
The global supply chain industry finds itself at a juncture, grappling with pressures from geopolitical tensions, shipping disruptions and looming threats from climate change and technological advances.
These developments have enabled a widespread re-evaluation of the global wave of outsourcing as countries and companies race to understand and adapt to shifting trade patterns.
Against this backdrop, S&P Global's leading specialists investigate the major themes that will shape supply chains in the decade to come, offering decision-makers a comprehensive overview to chart a resilient course forward.
Highlights from the report include:
- Trade remains the bedrock of the global economy – S&P Global expects global trade will grow at a compound rate of
3.3% through to 2028, outpacing GDP growth (2.6% ). Global supply chain expansion will be led bySoutheast Asia and emerging markets. - Supply chain policies will continue to shift towards national security priorities – rising protectionism, resource-guarding, sanctions and investment subsidies could increase inflationary pressures.
- Higher financing costs reduce firms' ability and willingness to invest in supply chain resilience; businesses prefer strategies that cut risks and boost profitability, like reshoring and technology enhancements.
- Foreign direct investments point to
Southeast Asia andMexico as reshoring destinations. - Workforce growth disparity between developed and developing economies will disadvantage industrialized market supply chains; cross-border labor mobility is expected to be held back by politics.
- Despite transporting
45% of global trade by value, the container shipping industry is ill-equipped to finance its decarbonization, with cost burdens remaining a powerful obstacle.
"Whether in the opportunities emerging from evolving dynamics and technologies, or the risks arising across geopolitical spheres, the strategic value of supply chains has never been more evident," said Edouard Tavernier, President, S&P Global Mobility. "This edition of Look Forward brings together the best of S&P Global research to spotlight the themes shaping supply chains, providing our customers the fresh focus and perspectives to stay ahead."
For more insights from Look Forward: Supply Chain (Volume 5 | February 2024), please visit: https://www.spglobal.com/look-forward/supply-chain
This is the 5th volume of the Look Forward research series from the S&P Global Research Council. For more information about S&P Global Research Council, please visit: https://www.spglobal.com/en/research-insights/featured/research-council
About S&P Global
S&P Global (NYSE: SPGI) provides essential intelligence. We enable governments, businesses and individuals with the right data, expertise and connected technology so that they can make decisions with conviction. From helping our customers assess new investments to guiding them through ESG and energy transition across supply chains, we unlock new opportunities, solve challenges and accelerate progress for the world.
We are widely sought after by many of the world's leading organizations to provide credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help the world's leading organizations plan for tomorrow, today.
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FAQ
What is the focus of the latest edition of S&P Global's Look Forward research series?
What is the expected compound growth rate for global trade according to S&P Global?
Which regions are expected to lead global supply chain expansion according to the report?
What are some challenges identified in the report regarding supply chain resilience?
Where do foreign direct investments point to as reshoring destinations?
