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Supply Chain Professionals Want More Resilience

Feb. 17, 2021
A new report finds that 87% of supply chain professionals want to put money, time and effort into bolstering supply chain resilience.

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Facing unprecedented disruption and continued uncertainty, supply chain professionals are ready to put more effort and investment into improving their organizations’ resilience. Defined as a supply chain’’s ability to “be prepared for unexpected risk events, responding and recovering quickly to potential disruptions to return to its original situation or grow by moving to a new, more desirable state in order to increase customer service, market share, and financial performance,” resilience has taken on a new meaning in the COVID world.

“The COVID-19 crisis has exposed massive vulnerabilities in the global supply chain,” Michael van Keulen writes in DigitalCommerce360. “It has also shed light on the need for organizations to have complete visibility into their business spend and more agility in the procurement process.”

Help Wanted

In 2019, organizations worldwide were dealing with trade wars, electronics component shortages, labor crunches and geopolitical issues like Brexit. By early 2020, the entire world’s attention shifted over to fighting a global pandemic and coping with the steep toll it was taking on human life, livelihoods, businesses and entire economies. The situation has yet to shift back as everyone continues to grapple with this “new normal” environment.

According to Gartner, 87% of supply chain professionals (out of a total 1,300 individuals surveyed) are now banking on supply chain resilience to help them overcome current challenges and plan for the future. Another 89% want to invest in agility, or a company’s ability to smoothly and profitably respond to external market changes. These initiatives are expected to be put in place within the next 24 months.

“Supply chain executives overwhelmingly recognize the necessity to make their networks more resilient and agile,” Geraint John, VP analyst at Gartner Supply Chain practice said in a press release. “At the same time, 60% admit that their supply chains have not been designed for resilience, but cost-efficiency. The challenge will be to create an operating model for supply chains that combines the best of both worlds and also delivers supreme customer service.”

Covering the Costs

According to Gartner, 75% of supply chain professionals says that the additional investments being made in resilience and agility will be covered by their existing supply chain budgets. For this reason, the research firm says that chief supply chain officers (CSCOs) should take the lead in identifying where and how much to invest in these projects.

“In practice, the concrete investments will likely be a series of activities ranging from incremental projects in small firms to transformative capital investments by global industry leaders,” John said in the press release.

“We see that many organizations are investing in diversifying their supply base and redesigning products to mitigate risk,” he added. “More collaborative relationships with key customers and suppliers is also a priority for almost all respondents.”

Low Interest in Reshoring

For now at least, reshoring manufacturing and sourcing activities isn’t a top priority for most companies. In fact, Gartner says that just 30% of survey respondents are shifting from a global to a more regionalized supply chain model.

“The high level of integration in global supply chains, the regulatory burden of moving already established supply chains to a different location, and the concentration of key suppliers in certain geographies make it difficult to completely regionalize a supply chain network,” the company pointed out. “Further, high labor costs and a shortage of skilled manufacturing workers have long been an argument against domestic production in developed Western economies.”

Finally, Gartner says 45% of survey respondents think that their customers favor low pricing over domestic sourcing and production—particularly in industries with high levels of price competition (e.g., retail and fashion).

“Cost differentials and cost-efficiency will remain key considerations for these supply chains – as for others – when evaluating any redesign of their operational networks,” Gartner said. “Nearly half of the professionals surveyed view lean methodologies, just-in-time (JIT) systems and low-cost country sourcing as being relevant to their future strategies.”

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.