Economic forecasts and supply chains

Roger OakdenGlobal Logistics

A recent forecast.

When reading forecasts of economic effects on the performance of countries, logisticians are looking for indications of trends that may affect the flow of items and importantly, the business models of logistics service providers (LSPs).

A recent forecast is the Manufacturing Competitiveness Index study, developed by Deloitte, in which 550 CEOs from around the world responded to survey questions. The top seven drivers of global competitiveness were considered as:

  1. access to talented workers
  2. economic, trade, financial and tax systems
  3. superior healthcare systems
  4. labour costs and availability
  5. supplier networks
  6. legal systems
  7. physical infrastructure

Based on the responses, it was concluded that in the next decade, Asia will contain 10 of the 15 most competitive countries. In the next five years the situation is expected to show China remaining the most competitive country, India as second and Brazil in third place.

So what?

The question for logisticians is by how much will global supply chains change by 2017 to reflect these findings? My opinion is they will not, due to the situation specific to India and Brazil.

The economic model for India and Brazil has been forms of self-sufficiency and while import and investment regulations have been relaxed since the 1990’s, it has resulted in the focus for both countries being an internally supplied and protected consumer market. Agreed there are competitive industries; India has developed industries in software services and generic pharmaceuticals and is growing its automotive industry for small passenger vehicles (mainly through Hyundai); meanwhile, Brazil has invested in its mineral exports.

I am unable to comment on Brazil, but based on my long association with India, of the seven competitive drivers listed above, only labour costs and domestic supplier networks are ‘winners’. The remainder would all have a ‘must try harder’ score to become competitive, even within the Asia region. The factor that can be most quickly addressed is the low level of infrastructure development, including power, water and transport facilities.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...