Current macroeconomic developments make it clear that returning to a pre-COVID-19 “normal” is not in sight. Manufacturers are facing headwinds in the form of double-digit inflation, labour shortages and energy scarcity, along with new regulations that are driving an increasing imperative to reduce waste and emissions. These headwinds impose new constraints on operations, drive complexity and unveil hidden vulnerabilities, fundamentally changing the balance of supply and demand in the process.

It is no surprise that global value chain failures are becoming more commonplace in such a challenging business environment.

To monitor disruptions and their implications on global value chains on a recurrent basis, the World Economic Forum, in collaboration with Kearney, has developed a quarterly-issued “Global Value Chain Barometer”. The September 2022 issue indicates increases in disruption events that are driven by climate-related (up by 96%), technological (up by 113%) and geopolitical (up by 311%) megatrends.

The resulting value chain breakdowns are at the forefront of executive board discussions around the world. Value chain resilience has become a C-suite topic. This attention to operations is one consequence of an ongoing redefinition of globalization that has been caused by a fundamental shift in the balance of supply and demand. For the first time in 80 years, generating supply is increasingly becoming a constraining factor for manufacturers’ success.

This is not a reversal of globalization. Manufacturers still face global competition, and, thanks to digital technology, the world is as interconnected as it has ever been. According to the United Nations Conference on Trade and Development, in 2021, global trade levels for goods surpassed preCOVID-19 levels by 15%. Meanwhile, Kearney’s FDI Confidence Index found that foreign direct investment in the same year was approximately 12% above 2019 levels. It is, however, a transition to the next stage of globalization. In this new era, winning strategies for manufacturing companies will no longer revolve solely around achieving economies of scale through outsourcing or developing markets at all costs. Customers expect product availability at all times and not being able to guarantee quick delivery in this volatile business environment can equal a lost sale. As a result, industry leaders have started to build value chain resilience through new strategies like global diversification and supply management.