THE BUSINESS OF INTERNATIONAL TRADE
A new study from the United States has suggested that global supply changes could change "drastically", as the industry reflects on lessons learned during the Covid-19 pandemic.
The research, carried out by legal firm Foley & Lardner LLP, surveyed just under 150 manufacturing executives on the future of supply chains in a post Covid-19 world. The study, titled "Accelerating Trends: Assessing the Supply Chain in a Post-Pandemic World", came up with several key findings, including that the focus of supply chains in the future could shift "from a focus on low costs and lean inventory, to one that prioritizes stability and resilience".
Analysing data from their survey, the firm found that 70% of respondents agree that "as a result of COVID-19, companies will lessen their focus on sourcing from the lowest-cost supplier", while 62% believe that there will be a decline in just-in-time manufacturing models.
Discussing the results, Vanessa Miller, co-chair of Foley’s Coronavirus Task Force and the firm’s Supply Chain Team, said that "The survey findings point to a significant shift in perspective, but not necessarily a new one ... 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."
Another finding from the survey suggests that visibility and transparency may be more valuable in supply chain management. 92% of the survey's respondents said they were taking steps to improve visibility in their supply chains, "including requiring more information on suppliers’ own risk management and continuity strategies."
Ann Marie Uetz, head of Foley’s Coronavirus Task Force, explains that "In the COVID-19 environment, more questions are being asked within the supply chain, and companies are sharing more information about their capacity with customers ... Whereas, prior to the crisis, customers might request information and not get it, in the midst of the pandemic it is no longer acceptable to not show your cards or be uncommunicative with buyers."
Another big question raised by the survey is how businesses will respond to China in future supply chain plans. Kate Wegrzyn, co-chair of Foley’s Coronavirus Task Force, says that "Companies that previously diversified their international supply chains in response to the U.S.-China trade war were better positioned to mitigate the effects of the pandemic ... That said, companies may also benefit from retaining certain processes in China while relocating others in a strategic manner that disperses risks of disruption."
According to the survey, 59% of respondents "have either already withdrawn operations" from China, "are in the process of doing so, or are considering it".
The report concludes with insights into the future of technology in supply chains, with automated systems a key talking point. James Kalyvas, Foley’s Chief Innovation Partner, explained that "As companies adopt more technology and automation into their production processes, realizing the benefits of these initiatives will require that efforts be structured for success from the outset ... That means identifying clear business objectives, tying payment to outcomes that achieve those objectives, and ensuring effective internal management of the implementation."
To read the study, Foley’s 2020 Global Supply Chain Disruption and Future Strategies Survey Report, go to www.foley.com/-/media/files/insights/publications/2020/08/accelerating-trends-report-2020_final.pdf
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