"Global trade flows from manufacturers in the East to consumers in the West are undergoing a gradual shift toward shorter inter-regional routes as companies seek to reduce the distance between the production and consumption of their goods," said the Philadelphia-based logistics company BDP International, summarizing the findings of a new survey conducted with its Centrx consulting unit and Temple University’s Fox School of Business.
"This shift in global trade flows confirms the growing economic parity between Western nations and emerging economies," BDP added.
BDP surveyed more than 200 companies throughout the world with annual revenues ranging from $100 million to over $10 billion.
Of the supply chain executives surveyed, 87 percent indicated their companies are considering or have already begun to move production closer to end markets, sourcing and selling their goods within the same hemisphere.
Arnie Bornstein, BDP’s executive director of marketing and corporate communications, said there are three reasons for the change:
- Emerging nations are starting to trade with one another, shortening world trade flows.
- Asia, Latin America and the Middle East have growing middle classes driving demand for consumer goods.
- It makes both operational and economic sense to have shorter supply chains, where goods are produced and consumed within the same part of the world.
“That’s why North American companies are looking to Mexico and Latin America as a manufacturing base; EU companies are looking to Eastern Europe and Turkey; and Asian companies want to sell more of their production to Asian consumers as more than a hedge against sluggish export markets in the West,” Bornstein said.
BDP said the trend appears to be more pronounced among smaller companies.
“The survey suggests small to mid-size enterprises are more aggressively pursuing inter-regional supply chains because they have far less invested in sourcing infrastructure and are newer entrants to the world of international trade,” Bornstein said.
When queried regarding which regions show the greatest potential for inter-regional trade flows, over half of the survey’s respondents (56 percent) cited Asia-Pacific, followed by 28 percent for the Americas and just 6.7 percent for Europe.
“The bias toward Asia is further evidence of the growing economic importance of the region,” Bornstein noted. “The Americas have been attractive largely due to NAFTA and Mexico’s proximity to U.S. markets, improving cross-border infrastructure, and more recently with the emergence of consumer economies in South America.
"The low response for Europe is somewhat surprising given its more than 600 million inhabitants and lower trade barriers, but likely reflects the continent’s continuing economic woes.” he said. - Chris Dupin