Building Resilient Global Supply Chains – A Citi Report
The latest report from Citi, titled “Supply Chain Financing – Building Resilience as the New Definition of ‘Global’ Emerges,” offers a comprehensive insight into the evolving landscape of global trade and supply chains. Published on January 22, 2024, this report marks the fourth edition of the Citi Global Perspectives & Solutions (Citi GPS) series and stands as a testament to the transformative changes in global trade dynamics.
Transformative Technological Innovations and Resilience
Jane Fraser, CEO of Citi, highlights the crucial role of transformative technological innovations in increasing resilience across global supply chains. This focus on resilience is driven by a universal pursuit of security across various domains like food, water, energy, cyber, financial, and operational. The report underscores a significant shift in the reconfiguration of supply chains to meet customer demands and stakeholder expectations. This shift is not only reshaping global trade but is also fostering economic growth.
Adoption of China Plus One Strategy
A notable finding in the report is the adoption of the ‘China Plus One’ strategy by over half of the global respondents, especially in North America. This strategy involves diversifying supply chains by incorporating an additional sourcing destination alongside China, with Vietnam emerging as the preferred alternative. This trend indicates a conscious effort by companies and nations to diversify their supply chain partners, thereby building new trade corridors and enhancing resilience.
Technological Developments in Trade Finance
Chris Cox, Global Head of Trade and Working Capital Solutions at Citi, emphasizes the central role of technology in trade finance. Innovations like artificial intelligence and blockchain are revolutionizing trade finance by enhancing operational efficiency, reducing costs, mitigating fraud, and improving transparency. These advancements are pivotal in improving access to efficient capital globally, especially for small and medium-sized enterprises (SMEs) and companies in emerging markets.
The Evolving Nature of Global Supply Chains
The Citi report delves into the evolution of global supply chains, highlighting the shift towards a new era of diversification. This transformation is evident in various ways:
- The emergence of smaller players in global trade, particularly last-mile suppliers in developing countries.
- Diversified economies spurred by increased investments in supply chains, as seen in countries like Malaysia, Thailand, Vietnam, Saudi Arabia, and the UAE.
- The creation of new trade corridors, exemplified by Brazil’s increased trade with India and China and the Middle East’s stronger connections with Asia.
The report acknowledges that while significant progress has been made, the transformation of supply chains is a gradual process, requiring time to build new relationships and achieve scale.
Challenges and Opportunities Ahead
Despite the easing of supply chain pressures since the peak in 2021, the report acknowledges ongoing challenges such as high inflation, rising interest rates, and geopolitical tensions. However, these challenges also present opportunities for smaller suppliers to engage more actively in global trade. The report advocates for continued collaboration on global solutions, emphasizing the need for standardization, technological integration, and regulatory harmonization to enhance supply chain resilience.