COVID-19 to cause drastic shifts in supply chain management
70% of respondents are looking to lessen their focus on sourcing from the lowest-cost supplier, to one that prioritises stability and resilience
In law firm Foley & Lardner LLP’s new report ‘Accelerating Trends: Assessing the Supply Chain in a Post-Pandemic World’ 70% of manufacturing executives expect their supply chains to move away from a focus on low costs and lean inventory.
Manufacturing executives are taking prudent steps to manage risk in their supply chains, strengthening relationships and increasing transparency with suppliers and buyers as the top strategy identified by survey respondents.
On top of this, 62% expect the focus on Just-In-Time (JIT) manufacturing models to also decrease.
In addition, the vast majority (92%) are taking at least some action to create more visibility within their supply chains, including requiring more information on suppliers’ own risk management and continuity strategies.
The reports also analyse the extent to which COVID-19 has accelerated the movement of production and sourcing away from China. Of the survey respondents who have operated in the country, 59% have either already withdrawn operations, are in the process of doing so, or are considering it. For manufacturers and suppliers that decide to reduce their reliance on China, survey findings have shown that 74% will consider moving supply chains to the US, 47% to Mexico and 24% to Canada.
The report also displays that the COVID-19 pandemic is also speeding up the adoption of new technologies and innovative business processes that improve supply chain efficiency and resilience. Survey respondents identified the top technologies they are considering as new tools or applications that improve supply chain visibility and tracking (47%) and operational analytics to better track business metrics and indicators (39%).
“The survey findings point to a significant shift in perspective, but not necessarily a new one,” said Vanessa Miller, co-chair of Foley’s Coronavirus Task Force and the firm’s Supply Chain Team. “After the Great Recession, we saw calls for sweeping change, albeit on different issues, only to find that some of it was easier said than done. But 2020 is not 2009, and we may very well see companies follow through this time – especially if they see continuity of supply begin to overtake price as a key driver for success.”
The survey drew on responses from nearly 150 manufacturing executives from a wide array of industries.