Framework to plan for global uncertainty

To enable decision makers respond to uncertainty in global value chains, the World Economic Forum has released a Strategic Value Framework in partnership with the United Nations Develop Programme (UNDP).

Taking a case-study approach to understanding the rapid changes affecting global trade and supply networks, the framework looks at the cotton industry, the electronics industry, and the automotive industry.

In a positive outcome, leveraging the disruptions that will occur across these supply chains has the potential to increase total value by 65 per cent over three years. The potential disruptions covered include emerging technologies, the climate emergency, and trade tensions.

If no action is taken, however, the Forum predicts that a loss of 28 per cent could occur in the global value chains.

While being across such changes is a complex task, according to Børge Brenda, president of the World Economic Forum, there are ways of coming to terms with the profound changes disrupting industry.

“Stakeholders should no longer stand alone in this complex environment, but rather form new partnerships and take a multistakeholder approach to more efficiently use, transform and trade resources,” said Brenda.

The Framework identified three key ways that businesses can prepare for disruptions to their value chains. The first, “from upstream to downstream” encourages companies to look at how their supplies can be fitted to changes in consumer needs. The second, “from economies of scale to economies of skills” looks at how specialisation is a way for businesses to become more resilient. The third, “focussing on costs to focussing on profits” takes a wider view of value generation, all the way through the value chian.

As UNDP administrator Achim Steiner highlighted, current ways of doing business are undergoing rapid shifts.

“Global value chains have helped fuel significant global economic development and GDP growth, but the current global system of production will evolve radically in the next decade,” said Steiner.