Catalysed by the sweeping tariffs agenda being implemented by President Donald Trump’s administration in the US, the era of “easy global free trade” is being replaced by a more multipolar world, according to the chief science officer of supply chain insights company Altana.
Speaking to Investment Monitor, Peter Swartz describes the upheaval being wrought by the proposed tariffs as “a very intense moment of deglobalisation”.
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He adds: “But it’s important to bear in mind that this has been going on for more than a decade at this point. What I mean by that is we see this as being an inevitable product of the geopolitical stresses on the global system.
By way of example, Swartz notes ongoing tensions between the US and China, a shift toward greater supply chain regulation in Europe and a more general change in the global trade system to one with more parties at play.
Altana’s insights are notable for its value chain management platform being built on what Swartz describes as “the largest underlying map of the global supply chain”, but he and the company’s other co-founders “started the company in 2018 with the expectation that globalisation wouldn’t last”.
“Let’s not overly romanticise the previous era,” Swartz says. “You had tonnes of forced labour and slave labour – millions of people, sadly, forced into that situation – huge environmental impact with things like deforestation. You had lots of just inequity. You had deindustrialisation in much of the West. There are things that were not good about the previous globalisation, and where we think it’s going is you will see that more multipolar world. You’ll see that world in which, fundamentally, the world is fragmenting into blocks.
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By GlobalData“I can’t tell you which specific blocks – what those blocks will look like. Your readers can read the news as well as I can. But what I can tell you is that it will not look like the previous era of easy global free trade across the entire planet, and what it will instead look like is more complexity, more regulation, and, really, a reordering, and there’s the opportunity to thrive in that.”
Swartz’s outlook aligns closely with assertions in a number of recently published reports from Investment Monitor’s parent company GlobalData. Its Demographic Trends Impacting Supply Chains report contends that “the era of easy, frictionless supply chains is over”, with the global supply chains organised to optimise profit and speed for over two decades having been “flipped upside-down by the Covid-19 pandemic” and continued disruption since then necessitating that supply chains be regionalised, among other strategic moves.
The Tariffs and Trade Wars Executive Briefing (First Edition) states that Trump’s tariffs will “further disrupt global supply chains” but that a silver lining may be “the potential strengthening of regional and inter-regional trade ties outside the US.”
And, in relation to the escalating US-China trade war, GlobalData’s China Tech report says: “For some time, China has sought to expand its influence across developing markets, financing infrastructure projects and making recipient countries dependent on its technologies. This trend will likely continue, with further fragmentation of global supply chains and even the creation of separate technospheres with competing standards.”
Understanding supply chain changes
In a separate recent interview with Investment Monitor, Abe Eshkenazi, CEO of the Association for Supply Chain Management, said of the ongoing disruption for supply chains: “Prior to the pandemic, unfortunately, we were living on a razor’s edge. We had some latent issues within supply chains that really were uncovered or exposed through the supply chain, specifically visibility, traceability and transparency.
“The first is the visibility, and that’s the one that probably caused the most concern. The majority of our companies, or the supply chain organisations, did not have visibility beyond tier one, where most of the disruption occurred was in tier two and tier three. So, over the past three to four years, we’ve worked really hard to identify who and what is in our supply chain. Today, I’m not sure there’s a supply chain professional that can walk into the C-suite and say: ‘I don’t know who or what is in my supply chain.’
“That’s the good news. The not-so-good news is that we now know who and what is in our supply chains, and we’re finding out that we’re not as resilient, we’re not as sustainable and we’re not maybe as ethical as we believe we should be.”
While Eshkenazi and Swartz share the opinion that the impact of tariffs – or other supply chain disruptions – varies by industry, both are also clear that visibility into the different tiers of supply chains is critical for businesses across sectors.
Of Altana’s view on the impact of tariffs specifically, Swartz comments: “This understanding of the multiple tiers is so key to both understand the costs and then understand what adjustments need to be done. And because the policy affects the different industries in very different ways, their specific needs change, but the broader need of that visibility and action and then proof for the purposes of imports, for construction, for tariffs, for resiliency – that remains.”
In addition to its core platform, insights drawn from Altana’s application of artificial intelligence (AI) to its supply chain data have been used to develop a Tariff Scenario Planner, which is aimed at allowing businesses to quantify the likely financial impact of tariffs being imposed and find potential alternative supply sources. Like its main platform, the planner is intended to help businesses follow a process for adapting to supply chain disruption.
“We talk about it in terms of: ‘see, focus and act’,” explains Swartz. “The first thing to do is understand what’s actually happening. The reality is that many companies out there don’t understand the multiple tiers of their supply chain, and even their internal data is quite siloed and not unified. So, the first thing is to actually be able to unify internal data and then bind it to a multi-tier understanding of what’s occurring, by which I mean everything from the extraction of the raw materials to the distribution of the final goods – everything that’s going to be needed to understand resiliency, to understand tariffs, to understand forced labour exposure, all of these things that are increasingly needed …
“Secondly, you need to focus on what’s important. For tariffs, that looks like understanding the impact by product line, understanding what free-trade agreements apply to which goods, what is going to be the rate, understanding both the existing tariffs and different scenarios, what’s going to apply, because you need to plan for the short term, the medium term and the long term …
“And then action, which is like collaborating. You’ve now constructed this multi-tier understanding as the corporation. You understand everything from the extraction of raw materials through distribution, a lot of which may be important for export controls, say, in electronics. But then you can actually collaborate with your partners. You can reach out to tiers, be like: ‘Hey, we need this document so that we can import it at this rate,’ or: ‘We need to understand more details about this facility because we’re concerned about its resiliency to the Ukraine conflict,’ or something like that.”
AI for supply chains
For Swartz, central to understanding and managing supply chains in this way now is AI. As alluded to earlier, the technology underpins Altana’s platform, but Swartz believes the impact of the technology will be more broadly profound – particularly at a time when supply chain challenges are becoming more complex.
“It’s all about actually understanding what’s happening and then being able to act at scale,” he explains. “And AI really serves to do both in a way that just wasn’t possible. We’re at this tremendous moment of disruption, but it’s a moment of disruption in two different ways.
“One is disruption from the end of the current era of globalisation. The second is the rise of modern AI systems that allow you to handle complexity at scale and actually understand your tens of thousands – or even hundreds of thousands for some companies – of suppliers and then the multi-tier impact. That just wasn’t feasible before – it now is. So, you’re really living at this moment where you really can take advantage and survive and thrive in this disruption.”
Fundamentally, he says, AI can help companies “understand at the level of the full trade flows on the planet, and you can understand it down to the micro level of specific facilities trading.”
At a time when global trade is becoming more complex, Swartz says AI can help companies see “the indirect effects, the second-order effects upstream and downstream, see the whole ecosystem adjust. For me, it blows my mind.”
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