Gartner: Supply Chains Are Set To Become More Resilient
The survey, titled “Weathering the Storm: Supply Chain Resilience in an Age of Disruption,” researched 260 global supply chains and their leaders across the months of February and March, and explores how operations are becoming more resilient, and how the movement of processes and resources out of China is becoming increasingly popular.
According to the survey, 33% of supply chains leaders plan to move business out of China, or at least plan to, by 2023. The cause for this decision is attributed to concerns surrounding tariff costs and concerns around how location can impact supply chain resilience, as companies look for alternative locations.
The survey also explored the disruptions that have impacted supply chains, not only in 2020, but in the last few years. COVID-19, whilst potentially the biggest disruption in recent memory, has not been the only thing giving supply chain leaders headaches. Kamala Raman, senior director analyst at the Gartner Supply Chain Practice, spoke about the disruptions of the US-China trade war, which broke out in 2018 and carried on into 2019.
“Already in 2018 and 2019, the U.S.-China trade war made supply chain leaders aware of the weaknesses of their globalized supply chains and question 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.”
US-imposed tariffs on manufacturing in China have increased over the past few years, and have in turn caused supply chain costs to rise by up to 10% for more than 40% of organisations operating in the country.
Ms. 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.”
Just 21% of the survey’s respondents feel that their networks are currently highly resilient, which means they have good visibility and have the agility to shift sourcing, manufacturing, and distribution operations around quickly.
55% of respondents believe that they will have more resilient networks within the next 2-3 years, following significant disruptions such as COVID-19, the US-China trade war and Brexit. However, the added resilience, and reaction to these disruptions, will lead to additional structural costs to the network, according to 58% of respondents.