Viewpoint: Prof. Désirée van Gorp on the future of global value chains

Viewpoint: Prof. Désirée van Gorp on the future of global value chains

Désirée van Gorp is Professor of International Business at Nyenrode Business Universiteit. She is also a member of the Supervisory Board of Atradius Credit Insurance. We spoke with her about her extensive research on offshoring and its implications for Dutch companies working internationally.

1. Your research focuses on offshoring, outsourcing, and global value chains. Can you tell us a little bit about what you’re working on now?

At the moment the focus of my research is on sustainable global value chains and the responsibilities of companies to contribute to that. Importantly, it is essential to have the least developed countries also integrated in these value chains, moving away from commodities and low skilled labor towards higher added value activities.

There are ways we can stimulate the integration of least developed countries into higher value-added activities. One enabler to do so is developing national policies to take advantage of digitization providing low entry barriers for entering global platforms. Another stimulant for integration is enhancing international trade and investment among others by lowering rules and regulations. Inclusion in higher value chains is one of the goals of the current treaties and investment talks at the World Trade Organisation (WTO). The WTO talks are very important because they have been about breaking down rules and regulation barriers to enable greater economic and social inclusion.

2. In your 2012 inaugural lecture at Nyenrode, you commented that “there is no more offshoring since there is no longer a shore.” Does this mean that companies benefit from a level playing field internationally, or are they limited by the rules and regulations of their home nations?

The notion of “there is no more offshoring since there is no longer a shore” is a quote of a former CEO of IBM and relates to the fact that companies start as “born globals,” meaning they start with their global platform and locate their activities right from the beginning at the location that provides them with most comparative advantages. So GLOBAL is the paradigm from the start. However, there is still much work to do in terms of free trade and related rules and regulations to develop a truly international level playing field.

3. The logistics industry is fundamental to the operation of global value chains: ships, trucks, and logistics infrastructure make it possible to make the world “shoreless” in terms of production and distribution. What challenges do you think the logistics industry faces in meeting the demands of global value chains in the future?

I think 3D printing will impact the logistics sector and force companies to look at their business and operating models. The adoption of 3D printing will have a big effect on the future of the logistics industry. Prompt adaption to this change (when/if it comes) will be necessary to be able to reap its benefits. Companies need to have an answer to the idea of widespread 3D printing and other developments to be futureproof.

The speed of change is such that this needs to be done in a relative short period of time. Not all players will be fit to do so and may still be blinded by promising revenues coming out of the traditional models. It will be very difficult for them to give up something profitable they know so well, for something they do not know yet.

Many new competitors may come from outside the industry with business models that are not to be compared to the traditional ones, including the so-called ankle biters. Amazon is a good example of a company that has become an important competitor for the traditional banking industry; an outsider challenging the traditional banks. It is a thin line between the winners and losers in the logistic industry, i.e., those companies able to make the transformation in time and those who are not able to do so.

To understand what business models will best suit the future logistics industry requires a closer analysis of individual companies. It requires a very specific analysis of specific markets. In a more general shift, one trend that is predicted is a transition of B2B companies that will become B2C, meaning they will soon be able to go straight to consumers. 3D printing can play an important role in this. This B2B to B2C transition will mean that business models may include less of the middle man and business will be more consumer orientated with a need to focus on directly adding value to the customer experience.

4. Financial services are increasingly offshoring due to deregulation and the greater accessibility of financial services across borders. How do you see these changes impacting value chain financing in the future?

The offshoring of financial services took off really off at the end of the last century and has remained important in the financial services value chain. Robotization will probably change that in the sense that this development will decrease the number of activities being relocated to other countries. That is happening already and has the potential of growing and leading to a redesign of the financial services value chain.

For example, accounting, which would have normally gone off shore, is now increasingly so robotised. More generally, the trend of relocation for robotisation will not necessarily bring financial services always ‘back,’ but move them to wherever the robots are. Therefore, relocation is less of an issue.

5. Finally, what’s your favourite innovation in logistics? Why do you think it’s important or interesting?

From a value chain perspective, I think 3D-printing — if it really takes off — is an interesting development in terms of logistics. The question is whether it will be the disruptive force that some claim and how it will impact logistics based on a fundamental redesign of value chains.

Personally, I would see it as a tremendous opportunity for the sector if it succeeds to review existing business models and be at the forefront of developing scenarios for the future. At the same time, it should happen in a relative short time frame in order to be in the lead. It is a thin line between being the leader or becoming the loser.

The 3D printer trend may one day see 3D printers in the homes of consumers. We are at the beginning of this development. It is like the fax revolution; once it started, it really rolled out in a big way. The 3D printer revolution will be one of the trends which depends of scale. If the 3D printer becomes cheaper better and located at every home, we can talk about whole a different logistics industry.