Gartner Survey Finds 87% of Supply Chain Professionals Plan to Invest in Resilience Within the Next 2 Years
Continued Uncertainty and High Customer Expectations Challenge Chief Supply Chain Officers to Find New Trade-Offs Between Cost, Speed and Service
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% 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.”
Gartner defines resilience as the ability to adapt to structural changes by modifying supply chain strategies, products and technologies, and agility as the ability to sense and respond to unanticipated changes in demand or supply quickly and reliably, without sacrificing cost or quality.
Figure 1: Responding to a Disrupted World
“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.”
National Interests Clash with Competitive Pricing Demands
Especially high tech, healthcare and pharmaceutical organizations report that national interests will have increased influence over future supply chain decisions. This does not only refer to imminent national needs, such as vaccines and personal protective equipment, but is also a result of ongoing issues, such as the U.S.-China trade war or Brexit.
At the same time, 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. Cost differentials and cost-efficiency will remain key considerations for these supply chains – as for others – 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.
Automation as the Key to Domestic Manufacturing
Advanced robotics and other automation technologies provide opportunities to overcome this constraint. Fifty-six 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.
Gartner clients can read more in Supply Chain Executive Report: Future of Supply Chain — Crisis Shapes the Profession.
More information is available in the complimentary eBook: Future of Supply Chain: 5 Trends to Act on Now