The Geopolitical Weaponization of Supply Chain
Gartner for Supply Chain
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By Stan Aronow , VP Distinguished Advisor
Throughout 2023, we have seen supply constraints dissolve and inflation abate, but the current feeling among supply chain leaders is anything but serene. As the world’s largest economies continue to escalate nationalist industrial policies, the resulting regulatory barriers, import and export laws and sanctions have effectively led to the weaponization of supply networks.
Earlier this year, we polled our COO and CSCO communities on the biggest risks they were concerned might disrupt their businesses and supply chains. Geopolitical escalation topped the list by a large margin.
In response, last month, Gartner held an event for our COO and CSCO communities that included a panel discussion with three geopolitical experts from Denton’s Global Advisors (Amy Celico, Alvaro Vertiz and Kevin Allison) to explore these risks.
A Different Kind of Climate Change
The Denton’s experts cited the current geopolitical climate as the worst since the Cold War, as tensions rise in line with an ongoing shift toward multipolarity. Constructive political dialog is very difficult given two of the largest poles, China and the United States, currently disagree on just about every conflict and world challenge. That includes their responses to the pandemic and their positions on the Russian invasion of Ukraine, Israel-Hamas war and Taiwanese independence.
The future of Taiwan keeps many supply chain leaders up at night, particularly any business reliant on semiconductors. Lately, China’s military drills in the region have accelerated and the United States has responded with increased military presence, both sea and air, in the region. The recent Biden-Xi meeting on the sidelines of the APEC summit seemed to stabilize near-term conditions, but upcoming Taiwan elections, in January 2024, are another potential flashpoint. The pro-independence DPP party is most favored to win and a recent attempt to unify more pro-Beijing opposition parties was short-lived.
When asked about the chances of a near-term invasion of Taiwan, the Denton’s team saw lower risk, with China distracted by a slow economy and outstanding questions on their ability to “win” militarily. In Denton’s view, the biggest medium-term (5 to 7 years) risk would be a military accident in the Strait which, with high presence on both sides, could quickly escalate. A blockade and takeover of offshore islands would be the most likely scenario. This would trigger a series of sanctions and regulatory restrictions – moves and countermoves. Global impact would spread beyond semiconductors. Independent of any Taiwan escalation, the Denton’s experts saw U.S./Western restrictions on technology ratcheting up, reducing access to cutting-edge technology and AI training models.
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Other Community Learnings
There were other interesting takeaways from the Denton’s panel discussion, including:
So, what should supply chain leaders do in the face of today’s heightened geopolitical environment?
Thanks again to the Denton’s Advisory Services team and our broader COO/CSCO community for joining this informative session. This will be our last Beyond Supply Chain blog of 2023. We hope you all have a restful and joyous holiday season with friends and family!
More supply chain insights:
This newsletter provides an opportunity for Gartner analysts to test ideas and move research forward. Some comments or opinions expressed hereunder are those of individual analysts and do not always represent the views of Gartner, Inc. or its management.