GEP: Brand reputations damaged over supply chain disruption
Businesses are facing measurable damage to brand reputation as a direct result of the disruptions in supply chains over the past three years, according to a new study from GEP.
Of 400 C-suite executives in supply chain, procurement, strategy and other associated disciplines questioned in a new report, 40% said their brand image had been markedly tarnished due to disrupted supply chains.
Almost a third (30%) reported a rise in customer complaints, with delays to product launches (26.5%) and a loss of regular customers (23%), which compounded this issue as they struggled to deliver products and services in time.
The findings come from The Cost of Supply Chain Distruption, a report commissioned by GEP and conducted by The Economist. It includes insights from top executives at $500m-plus companies in the US and Europe, across six industries: agriculture and food, industrials, CP&R, healthcare and pharma, and energy and utilities.
Findings in brief
- 45% say COVID-19 most responsible for disruption
- 36% say cyber attacks are a growing concern
- 31% say geopolitical instability the biggest concern for future disruption
- 61% say resilience more important to future supply chains than speed and efficiency
- 54% agree significant changes must be made to confront disruption of next five years
Though the outbreak of the COVID-19 pandemic last year was the key cause of disruption for 45% of respondents, growing concerns surrounding cyberattacks (36%) as evidenced in last year’s SolarWinds scandal, price fluctuations (33%) and diverging standards and regulations (32%) are placing additional strain on supply chain functions.
Digital transformation and technology-based solutions will be key to recovery, according to the report. Automation, AI and ML practices will be invaluable in freeing human employees to dedicate their expertise to managing skyrocketing ecommerce and online purchasing, shielding against cyber attacks, and adopting stricter health and safety strategies - likely as a result of the coronavirus outbreak.
Though the pandemic will remain a top-line concern for risk management, age-old geopolitical instability is a more pressing issue. Nearly a third of respondents (31.5%) said corruption, trade policies and localised conflict pose the biggest risk to their supply chains in the coming five years - above the pandemic (28%).
The result will be a focus on risk-management and more localised thinking - both geographically and in terms of scale. Strengthening bonds with current suppliers will be the top action for executives in the coming months and years, as well as simplifying the supply chain by working with fewer disparate vendors and partners. On-shoring and near-shoring are expected to become big trends, alongside hiring and training a permanent supply chain risk-management team and formalising associated policy. These will be backed by further digital transformation in 29% of respondents’ organisations. Software to deliver greater visibility will be a priority for more than a quarter.
Resilience is king
The Cost of Supply Chain Distruption, GEP and The Economist
The results reveal a common theme: that resiliency will trump speed and efficiency in the supply chains of the near future. In fact, 61% of respondents agree or strongly agree that building further resiliency and redundancy into their supply chains must take precedence over fine tuning of efficiencies.
Either way, more than half believe effective management of disruption in the coming five years will require significant changes in process and strategy. Greater visibility and less reliance on overseas manufacturing and logistics powerhouses will also be key.
Biden establishes Supply Chain Disruptions Task Force
The US government is to establish a new body with the express purpose of addressing imbalances and other supply chain concerns highlighted in a review of the sector, ordered by President Joe Biden shortly after his inauguration.
The Supply Chain Disruptions Task Force will “focus on areas where a mismatch between supply and demand has been evident,” the White House said. The division will be headed up by the Secretaries of Commerce, Transportation, and Agriculture, and will focus on housing construction, transportation, agriculture and food, and semiconductors - a drastic shortage of which has hit some of the US economy’s biggest industries in consumer technology and vehicle manufacturing.
“The Task Force will bring the full capacity of the federal government to address near-term supply/demand mismatches. It will convene stakeholders to diagnose problems and surface solutions - large and small, public or private - that could help alleviate bottlenecks and supply constraints,” the White House said.
In late February, President Biden ordered a 100 day review of the supply chain across the key areas of medicine, raw materials and agriculture, the findings of which were released this week. While the COVID-19 health crisis had a deleterious effect on the nation’s supply chain, the published assessment of findings says the root cause runs much deeper. The review concludes that “decades of underinvestment”, alongside public policy choices that favour quarterly results and short-term solutions, have left the system “fragile”.
In response, the administration aims to address four key issues head on, strengthening its position in health and medicine, sustainable and alternative energy, critical mineral mining and processing, and computer chips.
Support domestic production of critical medicines
- A syndicate of public and private entities will jointly work towards manufacturing and onshoring of essential medical suppliers, beginning with a list of 50-100 “critical drugs” defined by the Food and Drug Administration.
- The consortium will be led by the Department of Health and Human Services, which will commit an initial $60m towards the development of a “novel platform technologies to increase domestic manufacturing capacity for API”.
- The aim is to increase domestic production and reduce the reliance upon global supply chains, particularly with regards to medications in short supply.
Secure an end-to-end domestic supply chain for advanced batteries
- The Department of Energy will publish a ‘National Blueprint for Lithium Batteries’, beginning a 10 year plan to "develop a domestic lithium battery supply chain that combats the climate crisis by creating good-paying clean energy jobs across America”.
- The effort will leverage billions in funding “to finance key strategic areas of development and fill deficits in the domestic supply chain capacity”.
Invest in sustainable domestic and international production and processing of critical minerals
- An interdepartmental group will be established by the Department of Interior to identify sites where critical minerals can be produced and processed within US borders. It will collaborate with businesses, states, tribal nations and stockholders to “expand sustainable, responsible critical minerals production and processing in the United States”.
- The group will also identify where regulations may need to be updated to ensure new mining and processing “meets strong standards”.
Partner with industry, allies, and partners to address semiconductor shortages
- The Department of Commerce will increase its partnership with industry to support further investment in R&D and production of semiconductor chips. The White House says its aim will be to “facilitate information flow between semiconductor producers and suppliers and end-users”, improving transparency and data sharing.
- Enhanced relationships with foreign allies, including Japan and South Korea will also be strengthened with the express proposed of increasing chip output, promoting further investment in the sector and “to promote fair semiconductor chip allocations”.