Companies expect shorter, simpler supply chains

Many firms around the world are optimistic about the future of supply chains and believe they will become shorter and simpler by 2022.

The findings come in a report from Standard Chartered, in partnership with The Economist Intelligence Unit (EIU), and based on a survey of 522 corporate executives across 13 countries in North America, Europe and Asia Pacific conducted in February this year.

According to the report, entitled ‘Rebooting supply chains, Shorter, smarter and more sustainable?’, 49% of firms surveyed anticipate more efficient supply chains within five years, while 33% believe their supply chains will become longer and more complex.

Nine in 10 respondents agreed innovation is important for strategic supply-chain management and the survey identified supply chain digitisation and achieving greater transparency as their top long-term objectives.

Additionally, 55% of companies describe digitisation as either an important or very important five-year objective for their supply chains. Companies also see a need for greater visibility across their sourcing networks, with 54% agreeing that achieving complete transparency about where and how their products are made is an important or very important goal.

Companies expect operational improvements and innovations will help them reduce the length and complexity of their supply chains. However, the study concluded that shorter supply chains aren’t necessarily simpler – particularly for consumer-facing industries, where customisation and personalisation are becoming important trends.

The report notes that concerns about geopolitical and economic risks have grown among those who oversee company supply chains. Both Brexit and the apparent arrival of a new era in US trade policy under Donald Trump’s presidency have created new uncertainties. For example, factory managers in Asia, whose operations are vital links in many companies’ global supply chains, may read nationalistic rhetoric from the West and logically wonder whether some of their supplier relationships have become politically inexpedient.

Senior executives at multinational corporations (MNCs) with complex sourcing networks spanning the globe may worry that populist pressure could force them to re-shore jobs or to rethink how their products are made and where they come from. These fears are not necessarily unfounded, the report concludes.

The rules of global trade are shifting and companies will need to make sure their supply chains have the agility and resourcefulness to deal with potential challenges and disruptions that may lie ahead. Questions remain about whether the pace of globalisation will slow considerably, shift its direction or possibly reverse

The survey found that company executives are focused on keeping down operating costs over the next year and increasing operational transparency through technological innovation. Over the next five years, companies envision bigger changes: sourcing networks will be simpler, smarter and ideally more sustainable.

Other key findings from the research include:

  • Most companies are confident about being able to deal with supply-chain disruptions over the next year, but they are very sensitive about costs.
  • Those who are better prepared are more confident about dealing with supply chain challenges and disruptions. There was substantial agreement on the need to lower costs in the supply chain.
  • Innovation is seen as a crucial part of strategic supply chain management because it will help create full visibility across production networks and thereby support sustainability.
  • Commitment to technological innovation is solid in supply chain management, with 93% of executives surveyed identifying it as important. Companies that believe innovation is very important are also more confident they can address external disruptions.

“Treasury may yet emerge as a leader of strategic supply-management efforts (but) are treasurers ready for the challenge?” the report asks

“Companies rate core skills of the treasury function highly when it comes to managing supply chains in the future, but most companies still see treasurers in a governance role, rather than having a strategically important role for supply chains, the authors conclude.

“Treasury will have to be enabled and some industries – such as IT, energy and industrials, are more likely to thrust treasury into a leadership role. This begs the question: are treasurers ready to embrace the challenge of leading a supply chain?

 

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