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What is ally sourcing and how is it driving supply chain transformation

What is ally sourcing and how is it driving supply chain transformation?

Prof John Manners-Bell, Chief Executive of market research organisation Ti Insight and Director of the Foundation for Future Supply Chain, explores ‘ally’ and ‘friend’ sourcing – and how it will transform supply chain models – in his latest Whitepaper: What is Ally Sourcing and how is it driving supply chain transformation?

• China customs data for the first five months of the year (Jan-May 2022) indicates that bilateral trade between China and Russia increased by 28.9% to $65.8 billion
• Supply chain finance mechanisms restructured as Russia looks to create a new system
• Complex production supply chain networks and eco-systems cannot be unraveled quickly without inflicting huge damage on the global economy

Existing political tensions between the US, its Western allies and China have been stoked by the crisis in Ukraine. In the latest Whitepaper from Ti – the leading provider of market research to the global logistics industry – Prof John Manners-Bell explores global supply chains which evolve around political allegiances, rather than economic logic.

The whitepaper What is Ally sourcing and how is it driving supply train transformation? – which can be downloaded for free here – is one of 4 whitepapers published each month by the Ti team, utilizing data from its GSCI knowledge portal, a data powerhouse with over 1million pieces of data and analysis.

“The purpose of this paper,” explains Manners-Bell. “Has been to highlight the changing economic and political priorities which are starting to unravel the logic behind globalization. As supply chains become increasingly politicized and ‘weaponized’, things are set to get a whole lot more complicated.”

Report highlights

• Ally or friend: Two distinct supply chains are developing. The idea of ‘ally’ or ‘friend’ sourcing will create a world in which global supply chains evolve to structures based around political allegiances rather than economic logic.
• Surge in trade between Russia & China: China Customs data for the first five months of the year (Jan-May 2022) indicated that bilateral trade increased by 28.9% to $65.8 billion. Imports from Russia grew at 46.5% year-on-year although Chinese exports to Russia increased by a much lower level, just 7.2%.
• India has become an important market for Russian oil: Before the invasion, only a small volume was exported to India due to the cost of transport. This has rapidly changed due to India’s huge reliance on energy imports and the recent increase in the global price of oil.
• A new transport corridor: An agreement between Russia, India and Iran as well as a regional alliance of countries, including Central Asian republics, has facilitated the development of a transport corridor allowing containers to be shipped by rail from Russia through Iran and onto India by sea.
• New finance mechanisms: It is not only the physical element of supply chains which is being re-structured. Russia is also looking to China for help in developing alternatives to SWIFT, the system which underpins much of global finance.
• A new vision for globalization?: Pursuing the aim of ‘open and unfettered’ access to international markets has naively allowed countries such as China to promote their ‘soft power’ and influence through trade and investment. The West has only itself to blame (download the whitepaper to view these arguments in full.) After the Great Recession of 2009, many institutions and banks withdrew from emerging markets leaving a vacuum of finance. This allowed China to step into the void.
• Environmental and societal engineering: Trade is now being used as a lever to pressurize partners into falling into line with Western doctrine in much the same way as China has used trade and investment to promote its own interests.
• The threat of outsourcing: Western administrators have finally woken up to the threat to security presented by the out-sourcing of strategic elements of manufacturing to third-countries. Highly complex production supply chain networks and eco-systems cannot be unraveled quickly without inflicting huge damage on the global economy, especially in sectors such as high tech, automotive, chemicals, pharmaceuticals and aerospace.

The Whitepaper takes an in-depth look at recent and emerging alliances which are disrupting existing supply chain models, including Russia’s relationships with India and China, and what this means for transport and logistics. It also explores the role the West has played in allowing a China-centric trading network that has acted as a conduit for political leverage.

Ti Whitepapers, News and Reports are written by industry researchers, analysts and associates. Supply Chain professionals can access further market intelligence – unique data and analysis dedicated to the logistics industry – via Global Supply Chain Intelligence (GSCi), an online knowledge platform. GSCi is the go-to knowledge hub for all supply chain risk developments and disruptions.

To download the Whitepaper, which takes an in-depth look at recent and emerging alliances disrupting existing supply chain models, visit: https://www.ti-insight.com/whitepapers/ally-sourcing-supply-chain-transformation/

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