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Supply Chain Risk Greatest Threat to Manufacturing Companies

Sept. 9, 2021
In response to changing risks, 66% of CEOs report that they have had to re-think their approach to supply chains in order to become more agile, as well as bringing production closer to home.

The world must be reimagined is the conclusion of the most recent report from KPMG, KPMG in its Global Manufacturing Outlook 2020: COVID-19 Special Edition.

One of the largest areas that need to examine is the flexibility of supply chains. “The greatest threat to manufacturers’ growth over the next 3 years, apart from the pandemic, is the risk to the supply chain,” the report stated. In the report, 24% of manufacturers listed supply chain as the biggest threat with operations return to territorialism and supply of talent each recording 17%. 

In response to changing risks, 66% of CEOs report that they have had to re-think their approach to supply chains in order to become more agile, as well as bringing production closer to home and making their supply chain more robust. 

One of the fundamental ways that companies are now examining their supply chain is looking beyond Tier 1 suppliers. Previously some manufacturers knew very little about the location of their suppliers below Tier 1, the report noted. This has companies to look into both diversifying their supply sources, as well placing more emphasis on suppliers closer to their home base.

“Despite the rise of economic nationalism in the short term, these trends are unlikely to lead to a long-term ‘buy where you make’ approach to the supply chain,” says KPMG. 

“Companies will continue to look very closely at the cost of inputs, so they will still rely on cost-competitive suppliers. But the reduction of risk will likely be important as well, resulting in some rebalancing of the supply chain to create a value framework that also considers supply alternatives and channel simplification,” added Grant McDonald, Global Sector Leader, Aerospace & Defense, at KPMG International, in the report

To increase visibility and accountability in the supply chain, manufacturers are using advanced technologies such as blockchain and data analytics.

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