Executive Briefings

Accessing Hidden Costs in Broken Supply Chains

For decades, governments and companies around the world have focused almost exclusively on tariffs as the biggest impediment to global trade. Despite tariffs dropping to a 30-year low, reform efforts have stalled in recent years and international trade remains seriously constrained.

The inefficiencies and choke-points that hobble the global supply chain turn out to be a much bigger factor than government-imposed tariffs in restricting the flow of goods and services across borders.

Together with the World Bank, Bain & Company has analyzed the business implications of supply chain barriers"”everything from border delays and inconsistent product regulations to poor infrastructure and rampant corruption"”presenting findings in a report for the World Economic Forum. The analysis demonstrates that reducing even a subset of these obstructions could increase global GDP over six times more than removing all tariffs.

That has broad, long-term implications for policymakers, suggesting that governments need to refocus their efforts on creating efficiencies in the supply chain if they want to truly unlock the economic potential of global trade. For companies looking to take advantage of international markets, the message is more immediate: Making the right choices about where and how to deploy assets globally requires a full understanding and analysis of how these supply chain barriers affect return on investment. Failing to anticipate the costs and risks involved can wipe out the business advantages of sourcing, operating or selling in foreign markets.

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The inefficiencies and choke-points that hobble the global supply chain turn out to be a much bigger factor than government-imposed tariffs in restricting the flow of goods and services across borders.

Together with the World Bank, Bain & Company has analyzed the business implications of supply chain barriers"”everything from border delays and inconsistent product regulations to poor infrastructure and rampant corruption"”presenting findings in a report for the World Economic Forum. The analysis demonstrates that reducing even a subset of these obstructions could increase global GDP over six times more than removing all tariffs.

That has broad, long-term implications for policymakers, suggesting that governments need to refocus their efforts on creating efficiencies in the supply chain if they want to truly unlock the economic potential of global trade. For companies looking to take advantage of international markets, the message is more immediate: Making the right choices about where and how to deploy assets globally requires a full understanding and analysis of how these supply chain barriers affect return on investment. Failing to anticipate the costs and risks involved can wipe out the business advantages of sourcing, operating or selling in foreign markets.

Read Full Article