The Future of Global Supply Chains: Breaking or Reshaping?

10th December 2023

As the world continues to deal with supply chain disruptions, this article analyses how global supply chains are evolving and whether they will ever return to their pre-pandemic state.

The global supply chain, once an almost invisible force underpinning the modern economy, has found itself at the centre of a storm in recent years. From pandemic-induced factory closures to geopolitical tensions and logistical bottlenecks, the intricate web of production and distribution has been stretched to its limits. The question now is whether the old system will reassert itself or if we are witnessing the birth of a fundamentally reshaped global trade network.

Charles Reade’s Hard Cash, a largely overlooked 19th-century novel, offers an apt metaphor for the state of global supply chains. In the novel, the protagonist, Alfred Hardie, finds himself imprisoned in an asylum due to financial disputes, despite his clear rationality. His struggle to regain control mirrors the plight of businesses trapped by external forces beyond their control—container shortages, factory shutdowns, and unpredictable government interventions. Much like Hardie’s predicament, many firms are realising that reliance on the traditional supply chain model is a vulnerability they can no longer ignore.

The Fractures in Global Trade

Supply chains were built on efficiency, not resilience. The “just-in-time” model, heralded as the gold standard, ensured companies kept inventory levels low, reducing costs and boosting profits. However, the system’s fragility was exposed when COVID-19 led to factory closures in China, shipping delays, and a global shortage of everything from semiconductors to toilet paper. In the words of Thomas Carlyle, economics had become a “dismal science” not because of its theory, but due to its unforeseen fragility in practice.

The pandemic was not the only cause of disruption. Rising geopolitical tensions, particularly between the United States and China, have prompted businesses to rethink their dependence on any single nation. The semiconductor industry, dominated by Taiwan, has become a flashpoint for global security concerns. A conflict in the Taiwan Strait could send economic shockwaves around the world, highlighting how dangerously concentrated critical industries have become.

The Rise of Regionalisation

Faced with these uncertainties, many companies are shifting towards regional supply chains. The European Union has pushed for greater production autonomy, while the United States is actively investing in domestic semiconductor production through the CHIPS Act. This “reshoring” movement has echoes of the mercantilist policies described in Daniel Defoe’s A Plan of the English Commerce. Defoe argued that national self-sufficiency was the bedrock of economic security—a philosophy that now finds itself revived in a world that had previously placed all bets on globalisation.

However, this shift comes with costs. Global supply chains provided consumers with cheap goods by sourcing materials and labour from the most cost-effective locations. A move towards regional production will likely mean higher prices, a burden that will ultimately fall on consumers. The debate, then, is whether security and resilience outweigh the benefits of low costs and efficiency.

Technology as the New Trade Route

As the traditional supply chain model falters, technological solutions have gained traction. Companies are turning to artificial intelligence and blockchain to predict and mitigate disruptions. The rise of 3D printing also threatens to upend conventional manufacturing, potentially allowing businesses to bypass traditional supply chains altogether. This technological shift is reminiscent of the changes described in Samuel Butler’s Erewhon, a novel in which society both fears and reveres technological progress, uncertain whether it will be its saviour or its downfall.

Yet, technological fixes cannot fully resolve the deeper structural issues within global trade. Political instability, labour shortages, and environmental regulations will continue to shape the landscape of supply chains, often in unpredictable ways.

The Future: A Hybrid Model

It is unlikely that the world will completely abandon global supply chains. Instead, what is emerging is a hybrid model—one where critical industries maintain regional security while still leveraging global efficiencies. Businesses that can strike the right balance will find themselves better positioned for the economic realities of the next decade.

As the dust settles, the words of George Gissing’s New Grub Street come to mind: “To be at the mercy of circumstances is the last degradation of man.” Supply chains, long taken for granted, must now adapt to a world where circumstances are increasingly unpredictable. Whether they break or reshape depends on the actions of businesses and policymakers in the years to come.