CSCMP's Supply Chain Quarterly
October 16, 2019
Forward Thinking

What growing nationalism may mean for procurement

A report from the software and consulting company GEP argues that rising nationalism will mean increases in procurement costs and a growing need for risk-mitigation plans.

Geert Wilders' far-right Party for Freedom may have fallen short of expectations in the recent Dutch elections, but in general, nationalism still seems to be on the rise in the Western world. From the success of Brexit in the United Kingdom and the election of Donald Trump in the United States to the growing strength of nationalist parties in France and Germany, the pendulum seems to be swinging away from a full embrace of globalization. This geopolitical trend could have profound effects not only for governments but also for many companies' supply chain operations.

That might seem surprising, but in its "Procurement Outlook Report 2017," the procurement consulting and outsourcing company GEP identifies growing nationalism as one of five "global super trends" that will have a significant effect on procurement this year.

The report predicts that rising nationalism will cause increasing uncertainty around trade relations, put a strain on international cooperation efforts, and create a general sense of geopolitical instability. GEP's analysts believe the resulting damper on global trade will offset any growth benefits that might result from other economic policies favored by many nationalist parties, such as tax cuts and deregulation. For that reason, GEP predicts that global economic growth will remain stagnant in 2017.

These macro trends will eventually have an effect on the work of procurement and supply chain managers, according to the report. A slowdown in global trade will reduce competition, while tariffs and other protectionist policies will increase the cost of imported goods. As a result, GEP expects procurement costs to rise this year, and procurement will be under increasing pressure to reduce costs, improve efficiencies, and find more local supply sources. The report suggests that procurement managers focus not only on reducing the price of purchased goods but also on forming long-term collaborations with key suppliers that could drive down the total cost of ownership.

As geopolitical instability flares up, supply chain and procurement organizations should make sure they have a well-defined risk management process, GEP recommends. For procurement, this will mean an even greater need to closely monitor supplier performance and identify and mitigate any potential risks.

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