Reshaping Pips Reshoring of Global Supply Chains, HSBC Says

Globalization wobbled in the pandemic, even failed on some counts as the coronavirus spread around the world, but the changes companies are planning to strengthen their sprawling supply chains don’t suggest a big retrenchment from their overall strategy of international commerce.

That’s one way to read the results of an HSBC Holdings Plc survey of 2,604 companies in 14 nations and territories. The questions reached companies during some of the darkest days of lockdowns and soaring death tolls, from April 28 to May 12.

Two-thirds of respondents said their biggest priority was increasing control of their supply chain, the survey showed. But only 17% said shrinking their geographic footprint was the way to do it, and just as many are looking to expand their supplier base for more diversity regionally. Digitization, automation, better data and timelier technology were ways cited to prevent the supply failures in the future.

Reshaping Pips Reshoring of Global Supply Chains, HSBC Says

“What we’re seeing in reality is actually there isn’t that much reshoring going on -- there is reshaping and restructuring,” said Natalie Blyth, HSBC’s global head of trade finance. “You can see some of the old national champion approach coming back in, but it’s not viable globally to produce everything that our nation needs onshore.”

In the middle of the crisis, governments that raised export controls and other trade barriers on medical equipment quickly found that to be a losing strategy. Countries will probably move to stockpile medical equipment and raw materials, like the ingredients needed for 3D printing of protective gloves.

Reshaping Pips Reshoring of Global Supply Chains, HSBC Says

For all its disruptions, the successes of the past six months have been a prelude to a more formidable challenge in the months ahead, Blyth said. The pandemic’s supply shock, the knee-jerk protectionism and the collapse in demand that followed -- they were all just the warm-up for the big test of globalization’s resilience: delivering the vaccine.

“What we have seen through Covid is extraordinary collaboration between competitors, between supply chains -- people really caring about the whole end-to-end of the supply chain,” she said. “And that is what you’re going to see being absolutely necessary from a vaccine perspective.”

©2020 Bloomberg L.P.

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