Gartner: 33% of Supply Chain Leaders moving China operations
In a survey of 260 global supply chain leaders between February and March 2020, it was found that the COVID-19 pandemic is one of a number of disruptions that have put global supply chains under pressure.
“Global supply chains were being disrupted long before COVID-19 emerged,” said Kamala Raman, senior director analyst with the Gartner Supply Chain Practice. “Already in 2018 and 2019, the US-China trade war made supply chain leaders aware of the weaknesses of their globalized supply chains and questioned the logic of heavily outsourced, concentrated and interdependent networks. As a result, a new focus on network resilience and the idea of more regional manufacturing emerged. But this kind of change comes with a price tag.”
For decades, China has been the go-to destination for high-quality, low-cost manufacturing and it has established itself as a key source of supply for nearly all major industries, including retail and pharmaceutical. However, Gartner research has shown that the margin between those companies seeking to add jobs in China against taking them away narrowed sharply in 2019. This was primarily due to an increase in tariff costs.
“We have found that tariffs imposed by the US and Chinese governments during the past years have increased supply chain costs by up to 10% for more than 40% of organisations. For just over one-quarter of respondents, the impact has been even higher,” Raman said. “Popular alternative locations are Vietnam, India, and Mexico. The second main reason for moving business out of China is that supply chain leaders want to make their networks more resilient.”
It was found that just 21% of survey respondents believe that they have a highly resilient network today, which means that they have good visibility and the agility to shift sourcing, manufacturing and distribution activities around quickly. However, 55% anticipate to have a highly resilient network in the next two to three years - a reaction to disruptions like Brexit, the trade war and COVID-19.
While, 58% of respondents agree that more resilience results in additional structural costs to the network. “We are at a crossroads in the evaluation of global supply chains that pits just-in-time systems designed to improve operational efficiency against just-in-case plans that emphasize planning and preparing for a range of plausible scenarios,” Raman added. “To find balance, supply chain leaders must engage in risk management to assess their organisation’s willingness to take risk onboard and decide how to quantify that risk against other network objectives such as cost effectiveness.”
Interested in reading more? Click here!
Pandora and IBM digitise jewellery supply chain
Pandora has overhauled its global supply chain in partnership with IBM amid an ecommerce sales boom for its hand-finished jewellery.
The company found international success offering customisable charm bracelets and other personalised jewellery though its chain of bricks and mortar retail destinations. But in 2020, as the COVID-19 outbreak forced physical stores to close, Pandora strengthened its omnichannel operations and doubled online sales.
A focus on customer experience included deploying IBM’s Sterling Order Management, increasing supply chain resiliency and safeguarding against disruption across the global value chain.
Pandora leverages IBM Sterling Order Management as the backbone it its omnichannel fulfilment, with Salesforce Commerce Cloud powering its ecommerce. Greater automation across its channels has boosted the jeweller’s sustainability credentials, IBM said, streamlining processes for more efficient delivery. It has also given in-store staff and virtual customer service representatives superior end-to-end visibility to better meet consumer needs.
Jim Cruickshank, VP of Digital Development & Retail Technology, Pandora, said the digital transformation journey has brought “digital and store technology closer together and closer to the customer”, highlighting how important the customer journey remains, even during unprecedented disruption.
"Our mission is about creating a personal experience and we've instituted massive platform changes with IBM Sterling and Salesforce to enable new digital-first capabilities that are much more individualised, localised and connected across channels and markets,” he added.
Pandora’s pivot to digital
The pandemic forced the doors closed at most of Pandora’s 2,700 retail locations. To remain competitive, it pivoted to online retail. Virtual queuing for stores and virtual product trials via augmented reality (AR) technology went someway to emulating the in-store experience and retail theatre that is the brand’s hallmark. Meanwhile digital investments in supply chain efficiency was central to delivering on consumer demand.
“Consumer behaviour has significantly shifted and will continue to evolve with businesses needing to quickly adapt to new preferences and needs,” said Kareem Yusuf, General Manager, AI Applications and Blockchain, IBM. “To address this shift, leading retailers like Pandora rely on innovation to increase their business agility by enabling and scaling sustainable supply chain operations using AI and cloud.”
Yusuf said Pandora’s success was indicative of how to remain competitive by “finding new ways to create differentiated customer experiences that protect their enterprises from disruptions to help mitigate risk and accelerate growth”.