Is Intercontinental Freight Transport Outdated?

The economy should avoid all concepts based on large-scale intercontinental goods exchange as much as possible, recommends Jane Enny van Lambalgen, CEO of the consulting and management firm Planet Industrial Excellence.

(Frankfurt) She cites as reasons “geopolitical tensions that can disrupt supply chains uncontrollably at any time, as well as rising transport costs.” It is “the order of the day to move away from excessive global distribution of labor and goods across continents.”

Return to the Principle of Regionality

“In a world economy designed for globality, returning to the principle of regionality is difficult,” admits Jane Enny van Lambalgen. But she points out: “If all production in Europe and America depends on certain parts or steps in Asia, it also means that any conflict in Asia or in the corresponding Asian countries or transport routes can potentially paralyze the entire company.”

The often-cited cost advantage of 30 to 70 percent for production in Asia, depending on the industry and products, cannot be overlooked, admits the CEO of Planet Industrial Excellence. However, “in light of the risk of a complete production stop, clinging to cost categories of the current world situation is not justified,” she believes.

Two-Step Approach: First Procurement, Then Production

Jane Enny van Lambalgen advises companies to adopt a two-step approach to achieve greater independence from increasing geopolitical tensions. In the first step, the procurement side should be structured so that there are at least two suppliers for each intermediate product, distributed across different continents.

“This poses enormous challenges for medium-sized manufacturing companies,” the CEO knows from numerous projects. “Nevertheless, companies are well advised to tackle this first step quickly before something blows up somewhere in the world again,” she states casually. Jane Enny van Lambalgen elaborates: “Beyond the obvious conflicts in the triad of great powers USA, China, and Russia, which in turn harbor numerous proxy conflicts, many other dangers lurk around the globe, such as terrorist organizations, the effects of which no business leader can foresee. Smart CEOs therefore place deglobalization in the sense of production where the company’s customer base is located at the top of their agenda.”

Warning Against the Supply Chain Trap

In the quest for greater independence, Jane Enny van Lambalgen warns against the “supply chain trap”: “It is of no use to rely on a supplier in Europe for a European plant that is in turn dependent on Asian intermediate products,” she gives a concrete example.

She advises utilizing the effort associated with the current EU regulations on supply chains not only to provide the sustainability evidence required by lawmakers but also to examine the resilience of the supply chain in the face of geopolitical tensions. “The same applies to the supply chain as to any chain: It is only as strong as its weakest link,” the CEO points out, referring to “a truism that often receives too little attention in management.”

Positive Examples from Bosch to Hugo Boss

In the second step, the reduction of global dependencies should be extended beyond procurement to production sites. “What is sold in America should be produced in America. What is sold in Europe should be produced in Europe,” Jane Enny van Lambalgen summarizes. She assesses the recent trend of shifting production from Germany to Poland or other Eastern European countries as “economically uncritical and often sensible.” She cites Bosch, Miele, Viessmann “and many other medium-sized companies and corporations” that have successfully taken this path to the neighboring country.

“However, establishing a manufacturing facility in Asia is currently and likely for the foreseeable future only sensible if the products produced there primarily find a market in Asia,” she provides clear guidelines for deglobalization. On the contrary, she advises bringing manufacturing lines back from Asia to Europe as much as possible. “This does not necessarily have to occur through the establishment of one’s own European production facilities. Outsourcing to contract manufacturers with European production is a viable alternative,” she clarifies, “as long as it is ensured that the contract manufacturer is not caught in the supply chain trap.” As a good example of this model, she mentions the approach of the fashion company Hugo Boss.

Box Thinking in Cost Categories

Jane Enny van Lambalgen identifies “box thinking in cost categories” in large parts of the economy as a major hurdle to strengthening resilience through deglobalization. She concedes to the “cost riders in management”: “Of course, it is cheaper here and now to source intermediate products from Asia or to operate a production facility there than, for example, in Europe. But the risk associated with this dependency is constantly increasing and becoming more unpredictable.” This is especially true for the protection of specific know-how such as software, she notes.

Lessons from Corona Have Faded Again

Jane Enny van Lambalgen is surprised: “In many management floors, the lessons from Corona have apparently faded again. But one must be clear: Corona can come back at any time, only this time it may be called Taiwan.” She praises the move of the German medium-sized company Stihl to Switzerland as a “smart measure.” “A good example of a successful escape from the excessive regulations in the EU and the soaring operating costs for manufacturing in Germany,” judges Jane Enny van Lambalgen.

Jane Enny van Lambalgen is a founding partner and managing director of Planet Industrial Excellence and a member of United Interim, the leading community for interim managers in the German-speaking world, and the Diplomatic Council, a global think tank with advisory status at the United Nations (UNO). She works for companies as an interim manager for strategy, operational excellence, turnaround, supply chain management, and digital transformation. As a temporary manager, she takes on positions as CEO, managing director, COO, delegate of the board of directors, supervisory board member, and advisory board member in medium-sized businesses. Her focus is on international operations with an emphasis on production, supply chain, and logistics.