A 2020 Global Survey conducted by Cognitive Sourcing technology provider LevaData provides a further validation that tariffs and global trade tensions remain a primary concern among multi-industry manufacturing and supply chain management teams.
Prediction One and Prediction Two of our Ferrari Consulting and Research 20020 Predictions for Industry and Global Supply Chains separately declared that multi-industry supply chain teams will face a year laden with high levels of business and economic uncertainties, and in the areas of strategic and tactical supply management: Continued unparalleled levels of global supply network management challenges, especially centered on components and products produced in China, will continue to lead to ongoing structural product sourcing shifts during 2020-2021.
We anticipate that beyond the announcement and approval of a termed ‘Phase One’ U.S. and China trade agreement, currency, trade and other economic and intellectual property protection related tensions among these two global powers will extend into 2020 and likely into 2021 as-well.
Procurement and supply chain management along with sales and operations management (S&OP) leaders will therefore need to continue to be diligent to such an environment with a number of appropriate migration strategies in constant focus.
The LevaData 2020 Global Trade Survey consisted of a polling of more than 100 manufacturing and production executives with high tech, consumer goods, industrial, automotive and life sciences industry settings.
According to the survey’s announcement, when asked as to what challenges are likely to have the greatest impact on respective companies in the coming year, 42 percent of respondents indicated trade restrictions, followed by 15 percent of respondents pointing to geopolitical instability. Reportedly, upwards of 89 percent of the executives surveyed indicated that tariffs will increase production costs, generally in the range of 10-20 percent. More than two-thirds expected both production costs and material costs to increase in the coming year.
As a result, a significant number of respondents, noted as 79 percent, indicated that their company is likely to increase the pricing of goods and services. In other words, passing the added cost impact to customers.
This particular survey provides a strong indication of global recession, with a majority of either manufacturing and operations executives surveyed indicating that an extended trade war will likely lead to global recession this year.
Of Added Interest
What Supply Chain Matters found as more of interest in the LevaData survey were reported responses to the question of whether a trade war among the globe’s two largest economic powers will pay-off in the long-run. While nearly a third of respondents actively support tariff actions, 46 percent appear neutral.
Here is the most interesting statistic noted: A majority of respondents (reportedly 65 percent) believe that tariffs will ultimately lead to improved global trade practices with 40 percent pointing to improved U.S.-China trade relations in a 2 to 3-year window.
On the more succinct perspective of economic benefit, or our tariffs worth the overall pain in the long run, executives seemed split in viewpoints. Nearly half (47 percent) indicated they would lead to economic growth in the U.S., while an equal number (46 percent) indicated they would lead to economic decline.
The rest of the survey highlight announcement highlights responses to politically focused questions related to U.S. Presidential candidates. This blog is not going to highlight or comment on any of such data, and we pass along our viewpoint that technology providers sponsoring executive studies would be wise to steer clear of political oriented opinion surveys. Best to leave that data to professional political polling organizations to avoid the effects of a highly charged political environment that exists today across the U.S.
In summary, this highlighted survey does reinforce a multi-industry environment laden with uncertainty, added challenges and supply chain management concerns. The threshold of added cost increases will likely be passed along to customers and consumers, and that will undoubtedly lead to more top-line revenue challenges.
The obvious takeaway: the next two years will be challenging but at the same time, opportunistic for new thinking.
© Copyright 2020, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.