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BCG Executive Perspectives

BCG Executive Perspectives offer insights on global topics that matter most to leaders in the public and private sectors. Our latest edition explores emerging trade and supply trends and shares implications for businesses looking to build resilience amid looming uncertainty.

Edition 27: Achieving Supply Chain Resilience in a Volatile World

Global trade is expected to return to prepandemic levels by 2022 or 2023. But shifting geopolitical dynamics, industry-specific protective policies, ambitious new agreements, and a broader commitment to combating climate change means that businesses everywhere are headed into unfamiliar territory. Despite the potential for growth, widespread uncertainty and volatility will continue to put pressure on supply chains while redrawing the map of international commerce. In fact, should tensions continue to rise, G20 countries may see as much as $4 trillion in lost trade. For example, southern regions, such as Africa and Australia, will likely increase their trade activity, while no growth is expected in the US-China corridor.

A close look at these emerging trends, and others, reveals key implications for leaders.

Already, the unpredictable supply and demand shocks brought on by the pandemic have led to numerous supply chain shortages. As the world works to recover from the ravages of COVID-19, companies must take a twofold approach. On the one hand, they must become better able to absorb the shocks of disruption by making structural changes to the way they handle inventory, contracts, sourcing, and more. On the other hand, they must strengthen their ability to recover from supply chain shortages by adding digital capabilities and new processes that allow for the identification and mitigation of risks, as well as increased scenario planning. As businesses evolve their strategies, they must also find ways to become more sustainable for the long term—while also factoring in heightened climate-based regulations---by striving for a net-zero supply chain output.

Amid the uncertainty and complexity that businesses are sure to face in the coming years, preparedness is the name of the game. Resilience depends on the ability to anticipate and adapt; companies that build these muscles today will withstand the shocks of tomorrow—and recover well ahead of the competition.

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