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Supply Chain Resiliency to See Major Investment Over Next Two Years

Supply Chain Resiliency to See Major Investment Over Next Two Years

Feb. 16, 2021
In Gartner study, 60% admit that their supply chains have not been designed for resilience, but cost-efficiency.

Resilience in the supply chain is the ability to adapt to structural changes by modifying supply chain strategies, products and technologies, according to Gartner.

In a recent survey of more than 1,300 supply chain professionals, Gartner found that 87% of respondents plan investments in supply chain resiliency within the next two years.

“Supply chain executives overwhelmingly recognize the necessity to make their networks more resilient and agile,” said Geraint John, vice president analyst with the Gartner Supply Chain practice, in a statement.

“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,” he added.

Finding the funds for these investments can be a challenge. “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 added. “We see that many organizations are investing in diversifying their supply base and redesigning products to mitigate risk. More collaborative relationships with key customers and suppliers is also a priority for almost all respondents.”

Domestic Sourcing

Another issue to consider is that national versus global interests are a concern as countries try to get a better handle on their domestic supply chains.  About 30% of survey respondents report that they are shifting from a global to a more regionalized supply chain model.

Fifty-six percent of survey respondents think that automation will enable them to make onshore manufacturing economically viable.

However, costs are an overriding factor in that 45% of survey respondents think that their customers favor low pricing over domestic sourcing and production – particularly in industries with ferocious price competition, such as retail and fashion.

And shifting to onshore is difficult for a variety of reasons. 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, Gartner points out. Other concerns include both the high cost of labor in developed Western economics alongside a shortage of skilled manufacturing workers.  

Cost is Ultimate Determining Factor

Cost differentials and cost-efficiency will remain key considerations for these supply chains when evaluating any redesign of their operational networks, Gartner concludes.  Almost half of the survey respondents will use lean methodologies, just-in-time systems and low-cost country sourcing as relevant to lower costs in the future.

“Ultimately, the right balance between investments in resilience and agility, and cost-optimization depends on each organization’s individual circumstances, including their financial strength, market position, appetite for risk and external factors such as regulatory requirements or supply chain constraints. If CSCOs choose their investments wisely, they can expect to see positive results as soon as the next disruption,” John concluded.

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