Supply chain stability critical for recovery, say manufacturers

20 January 2021

Manufacturers believe supply chain stability is the most important element in the journey to recovery in 2021, according to a survey.

In a report by accountancy firm BDO, a survey of 100 CFOs in the US manufacturing sector found supply chain stability was the most important factor (cited by 20%) in overcoming the pandemic impact, followed by keeping low input costs and productivity (both 17%).

Amid the pandemic and obstacles including tariffs and trade sanctions, CFOs have decided “the biggest focus for resiliency investments in 2021 will be the supply chain,” said the report.

The focus has gone from crisis management to strengthening supply chains, with 52% planning to invest in supply chain technology and 50% intending to find alternative or backup suppliers. 

Better technology will ensure "new efficiencies, increase end-to-end visibility, and improve flexibility and responsiveness", said the report. 

A quarter (25%) plan to conduct a supply chain assessment, while 24% intend to relocate to another country, and 22% will reshore to the US.

Eight in 10 manufacturers (82%) with operations within the US and outside faced forced closures last year and as a result see the need to address weaknesses in their supply chains caused by “overreliance on one location or source”, said the report.

Europe was identified as the “most stable location” for sourcing in the long term, followed by South America and North America.

While US producers have heavily relied on China in the past, recent factors around "geopolitical tensions, multiple rounds of tariffs and rising labour costs" have led to a move away from region.

Two-fifths (39%) of respondents said they had benefited from shifting to bulk buying. The report recommended firms “re-evaluate” just-in-time inventory strategies and use alternative sources or stockpiles of critical materials or products. 

A similar proportion (40%) had seen positive benefits from streamlining product offerings. This could lower supply chain costs and reduce risk of shortages by focusing supply chains on a few key, high-performing products, said the report.

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