Mercado | Insights | How Will Population Shifts Impact Global Supply Chains? — Part 2

Insight: How Will Population Shifts Impact Global Supply Chains (Part 2)?

First Things First

Insight: How Will Population Shifts Impact Global Supply Chains (Part 2)?

May 3, 2023

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Every week, Mercado CEO Rob Garrison pens his latest learnings from the supply chain industry as part of an on-going series. Each article aims to share a little insight into what's going on that week, and to help foster discussion amongst industry professionals across levels, geographies, and companies.
In 1978, China began implementing market reforms, transitioning from a centrally planned economy to a market-driven model. By 1990, these reforms started taking shape, and 33 years later, China became the world's second-largest economy in terms of GDP.
Missed part one of the series? Catch up here
I had the opportunity to witness this transformation firsthand during my first visit. On that trip, it took nearly an hour and a half to travel the 20 miles from the old city airport to the Peace Hotel due to traffic congestion. However, it was our car competing with bicycles, not other cars. We couldn't exceed 10 mph, as bicycles darted in and out, making it too dangerous to drive faster. Bicycles had the right of way at every intersection, and the police strictly enforced it. Today, visitors can fly into the state-of-the-art Pudong airport and take a Maglev train to the city center, arriving in just minutes.

The transformation was so dramatic that I often had difficulty finding my way around Shanghai during my subsequent visits. Cumulatively, the changes are even more stunning, as illustrated in the chart below. As a 'supply chain guy,' I believe it's not a stretch to argue that the supply chain enabled China's growth, rather than the other way around.
Mercado Labs | What I Learned in Supply Chain | China and India
India will surpass China in population this year and it will be fascinating to see if India follows this playbook, not for market reforms (as India is already a market economy), but to support its population growth. For more details on India's population growth, please visit Part 1 posted on May 2nd.
Mercado | Insights - The $2.8T international supply chain visualized
"In an 'ideal' world, an importer would have at least one backup country, and one back up supplier for every critical product... All of this sounds good on paper, however it's actually incredibly difficult in practice."
One key reason is the dominance of China. Many importers are concerned about China as a sourcing point due to increasing tensions between the countries. However, the reality is that China dominates mfg in Asia, and they are very good at it.

As a result, quitting China is hard, as you will see in the excellent analysis below by Rita Rudnik.

A second reason is much more mundane. Most importers lack a robust database of their suppliers, and their supplier's suppliers. On the surface this sounds ridiculous, however we have gone through decades of 'predictable' supply chains where this wasn't a priority. Using the example above, most of the bike importers I spoke to were simply not aware of how reliant their suppliers were on Shimano.

My guidance to all importers is to address this database issue quickly. Beyond resiliency, knowing a lot about who makes your products, and who makes their parts, is also critical for understanding things like cost, ESG, and sales.

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About the author

Rob Garrison, Mercado CEO

Rob Garrison

A highly accomplished Global Supply Chain executive with 25 years of experience, Rob Garrison has provided strategic vision and leadership to Fortune 500 companies. Rob has an impressive history of building agile, technology-enabled supply chains, and he has an established track record of forging high-growth partnerships, positioning organizations for success and launching innovative technology solutions that significantly improve end-to-end supply chain efficiencies.

Rob is currently CEO and founder of Mercado Labs.
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