10 Things to Consider in the Global Economy

April 4, 2017 mpotepa

I had the opportunity to sit in on the CPO Leadership Summit in Atlanta, GA this week, hosted by IBM Watson Supply Chain. (I drove by the famous collapsed bridge on the way to the airport this morning as well!) . I presented the keynote to the group of procurement executives gathered, speaking on the subject of “The New Reality of Supply Chain Ecosystems”, which addresses many of the emerging issues that face supply chain executives in the digital world.

My session was preceeded by a discussion by Brian Bancroft, Vice President of Direct Procurement at Coca-Cola in Atlanta. Brian pulled together some interesting facts to consider, which he presented as the key issues to think about in terms of the global economy and issues facing us. Here is the list.

Anti-globalization. There is an influx of refugees due to strife, lack of opportunity and lack of water. More than 65M people were forcibly displaced in 2016 and 16M have not found homes. This administration and others across the world have not been proactive in addressing this massive shift in the global population. What is remarkable is that 53% come from Somalia, Syria, and Afghanistan. We have taken on a protectionist position here in the US, but oddly enough other countries like China has recently signaled an openness.
Labor arbitrage- labor costs and mfg. costs are going up and labor in the supply chain is going to continue to be an issue.
Because of the mass migration and the anti-globalization issues, companies are finding it harder and harder to fill positions, and talent management is a big, big problem. One executive in another session from the service industry noted that part-time contingent labor is one of the biggest challenges, and he has had to revert to dropping the drug test for many positions, as they would simply go unfilled and impact customers!
Tax cuts for big business is certainly imminent, but there is conflicting information. From a personal tax point, Trump is proposing moving from 7 tax brackets to 3 – and maybe will move the top bracket from 40% to 33%. The 35% corporate tax could be 15-20% and could be a boon to American companies. But the repatriation of profits – 2.7 T$ of profits outside the US – is a big issue. It may involve a discussion of a tax holiday or a flat 10% repatriation tax – which could stimulate job growth and return these profits to the US. Wait and see.
Slowdowns in the economic growth of Brazil, India, and China is having an impact on commodities, especially on agricultural commodities, due to demand decreases and increase of supply, which means that inventory is growing. Crude oil is a benchmark which was at a low of $29 in Jan 2016 – now around $50. Experts don’t expect oil to go over $60, and and to stabilize in the $51-73 range.
Global climate change – whether you believe it or not – you can’t argue with the fact that something is happening! California has more water than they can deal with – while there are other places where water is becoming a problem.
Natural disasters may be forcing some of the migration. Natural disasters are pushing people out – and health and economic issues as well as humanitarian needs for water, food, and basic medical care is exploding globally.
Currency fluctuations, supply risk, Anti-American sentiment are all major issues that make it difficult to sell abroad. As we take a look at imports/exports, and environment uncertainty it is likely that supply chain designs will move more towards more local sourcing, driven not only by total cost of ownership, but even more so by global risk mitigation.
The number one global issue is not about oil – it is about water. There isn’t enough of it. When someone from Coca-Cola says this, you better worry.
Decision support systems – and big data continues to drive lots of activity – and in next 3 years, there will be more than 8 times more data through people’s phones.

These predictions should create some interesting scenarios to consider in your strategic planning!