A global Gartner, Inc. survey of more than 1,300 supply chain professionals found that 87% plan investments in supply chain resiliency within the next two years, and 89% want to invest in agility.
Cost remains a priority, challenging chief supply chain officers (CSCOs) to find a new balance between resiliency, cost-efficiency and fulfilling increasing customer demands, Gartner reports.
“Supply chain executives overwhelmingly recognize the necessity to make their networks more resilient and agile,” said Geraint John, Gartner supply chain vice president.
“At the same time, 60% admit that their supply chains have not been designed for resilience, but cost-efficiency,” John admits “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.”
Gartner defines resilience as the ability to adapt to structural changes by modifying supply chain strategies, products and technologies. Agility is defined as the ability to sense and respond to unanticipated changes in demand or supply quickly and reliably, without sacrificing cost.
Three-quarters of respondents believe that the additional costs caused by the investments in resilience and agility will be covered by the supply chain budget. That’s why CSCOs must take the lead in identifying where and how much to invest.
“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.
“Many organizations are investing in diversifying their supply base and redesigning products to mitigate risk. More collaborative relationships with key customers and suppliers are also a priority for almost all respondents.”
At the same time, 45% of survey respondents believe that their customers favor low pricing over domestic sourcing and production – particularly in industries with ferocious price competition, such as retail and fashion.
Cost differentials and cost-efficiency will remain key considerations for these supply chains –when evaluating any redesign of their operational networks. Almost half of survey respondents see lean methodologies, just-in-time systems and low-cost country sourcing as relevant to future strategies.
Only 30% of survey respondents report that they 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.
Further, high labor costs and a shortage of skilled manufacturing workers have long been an argument against domestic production in developed Western economies.
Advanced robotics and automation provide opportunities to overcome this constraint – 56% of respondents think that automation will help them to make onshore manufacturing economically viable.
John believes the right balance between investments in resilience and agility, and cost-optimization depends on each organization’s individual circumstances, including financial strength, market position and appetite for risk, as well as 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,” he predicts.
