Chief financial officers surveyed in the US are viewing supply chain relocation as a “last resort” exercise in the wake of Covid-19, although supply chain diversification is on the cards.
According to the results of a recent pulse survey from PriceWaterhouseCooper (PWC) that featured responses from 305 CFOs, many are starting to think about business recovery and are planning changes to make their supply chains more resilient. 89% of the respondents were from public and private companies in the following five sectors: consumer markets (14%), financial services (20%), health industries (12%), industrial products (23%), and technology, media and telecommunications (20%).
According to the results, 56% of respondents are considering developing additional, alternate sourcing adoptions and 54% are trying to understand the financial and operational health of suppliers. 38% are planning a change in contractual terms while 36% are planning to extend visibility into supplier networks. 26% are planning to improve risk-protection measures, the same amount that plans to use automation to improve the speed and accuracy of decision-making.
“Findings confirm an emphasis on de-risking supply chains, as companies prioritise the health and reliability of their supplier base among changes they’re planning as a result of COVID-19. In particular, there is a focus on managing risk around supply elements, such as reducing structural vulnerability with other sourcing options,” the survey says.
“Some companies are starting to invest in creating data-backed profiles of their supplier base so they know where and when to look for second sources. Others are increasing communication with suppliers to better understand financial health. For many, conducting deeper financial and health reviews of suppliers will become a regular part of their business reviews.
“Physical supply chain relocations will likely happen only as a last resort, given the costs involved. However, automation of certain elements of the supply chain – to eliminate time-consuming manual tracking efforts and check tariff structures, for example – will likely become more common as companies seek better data to make more informed decisions.”
Clothing industry experts recently warned against knee-jerk reactions such as shifting production, especially since uncertainty around the virus means almost every country has its own restrictions about what can come in and go out.
But in the longer-term, onshoring and nearshoring are considerations since they potentially offer a shorter, faster, more visible and more manageable route to market.