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87 percent of supply chain pros plan to invest in resilience within the next two years

A global Gartner survey of more than 1,300 supply chain professionals has found that 87 percent of respondents plan investments in supply chain resiliency within the next two years. The survey, conducted from September 2020 through November 2020, showed that even more supply chain professionals (89 percent) want to invest in agility. However, cost remains a priority, challenging chief supply chain officers (CSCOs) to find a new balance between resiliency, cost-efficiency and fulfilling increasing customer demands.

“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. “At the same time, 60 percent 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.”

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, says Gartner.

“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,” Mr. 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.”

Only 30 percent 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 / labour costs and a shortage of skilled manufacturing workers have long been an argument against domestic production in developed Western economies. Advanced robotics and other automation technologies provide opportunities to overcome this constraint. 56 percent of survey respondents think that automation will enable them to make onshore manufacturing economically viable.

“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,” Mr. John concluded.

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