In our prior published Supply Chain Matters commentary, we shared 2022 prediction two from our research arm that restoring more direct control in strategic and tactical direct materials sourcing will be the driving force for businesses and their procurement and supply management strategy teams in the coming year.
Changing Geo-Political Landscapes
One area our research arm addressed in our prediction was a need for supply management teams to maintain a keen eye on geo-political developments and their potential impacts to existing and future direct materials sourcing strategies.
A specific area noted in our perspectives were consensus beliefs that a long-term decoupling between the United States and China relative to strategic and tactical supply network dependencies is more in the cards and is likely to provide further weighting for strategic sourcing strategies in the coming months and years. This growing reality has compelled a number of industry supply management teams to either execute or more seriously consider a termed ‘China Plus One’ sourcing strategy for deemed essential components.
Increased China and Taiwan Military Tensions
A prediction relative to geopolitical forces having impact on supply network sourcing strategies has to factor the increased political and military tensions occurring among China and Taiwan as well. While we are certainly not qualified to weigh in on the timing or likelihood of added military tensions or conflict, experts in this area tend to predict that the probability of such an occurrence occurring over the next 2-3 years requires some sense of weighting, consideration or supply resiliency actions.
Earlier this week, Bloomberg reported that Taiwan is bracing for more military patrols in 2022, after incursions in Taiwan air space nearly doubled this year. Reportedly, Chinese military aircraft made upwards of 950 incursions in Taiwan’s air-defense identification zone, according to Bloomberg compiled data. The report opines that tensions could rise further in 2022, with key political events scheduled to occur among these two neighboring nations.
To be clear, both governments have avoided more provocative actions not wanting to risk the implications of a military conflict. The concern that continues is that of a human or other type of accidental error occurring that could trigger a heightened escalation. A cited source at Taiwan’s Institute for National Defense and Security Research indicated to Bloomberg that China’s flyovers across the Strait of Taiwan “will increase as competition with the U.S. intensifies.”
Suffice to state that the implications of the threat of conflict among these two nations has major implications on high tech, consumer electronics, automotive and other industry supply networks, given the island’s strategic presence in leading-edge semiconductor and electronic component technology development and production.
While we have not specifically included this scenario in our 2022 prediction, we believe it is prudent to continue to highlight awareness. Various government think tanks are likely weighting the various probabilities of such considerations.
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