KPMG: Proximity the new Value Driver for Supply Chains
Globalised and longer supply chains have proven vulnerable to disruption in recent years.
This vulnerability, coupled with geopolitical and ongoing economic uncertainty, is driving businesses to reconsider the locations of their various procurement, supply chain and logistics operations.
This is backed up by fresh research from KPMG, which has found leaders are strategically reshaping their supply chains in an effort to achieve greater efficiencies.
The consulting giant has discovered that almost three-quarters of executives have successfully enhanced supply resilience and operational agility with strategic shoring, while 76% are drawing their supply chains closer to the Americas to better serve the US market – reducing lead times, diversifying supply, maximising access to talent and minimising risk.
A focus on regional and domestic operations
It’s widely recognised and accepted that supply chain fragility can weaken the business ecosystem and exacerbate global inflationary pressures.
In producing its new report, The Proximity Premium, KPMG spoke to executives representing organisations with annual revenues of at least US$1bn.
The firm found that the volatile global trade environment is forcing around three in five (61%) executives to refocus on regional and domestic sourcing and distribution, underscoring an urgent need to balance critical supply chain needs.
The Americas' share of supply chains to the US is expected to rise by 16%, while the average number of locations in a single supply chain is being consolidated for efficiency measures, falling from 2.7 to 2.4 locations over the next three years.
"Business executives are re-evaluating their supply chain assumptions with a primary focus on regional and domestic sourcing and distribution to mitigate geopolitical and economic uncertainty,” explains Jean-Pierre Trouillot, Partner and Regional Advisory Leader for the Americas at KPMG.
“Companies are seeing strategic shoring as a way to improve supply resilience and operational agility, offering them the benefits of proximity, cost efficiency and access to resources.”
Navigating tax and regulation
Elsewhere, executives report that the current tax environment (23%) and regulatory policies (31%) are among the top five challenges when it comes to achieving certain strategic shoring initiatives.
More than half (55%) of leaders with higher performing supply chains recognise the importance of navigating the tax and regulatory landscape, while a similar proportion (53%) say regulators and tax officials are significant influences in strategic shoring decision-making – second only to shareholders (56%).
KPMG’s take is that, by integrating tax strategies early in the process and scenario plan, businesses can realise cash flow efficiencies and a competitive advantage, ensuring a sound shift in supply chain strategy.
"Companies don't always consider tax as part of their overall strategic supply chain cost assessment," adds Doug Zuvich, Partner at KPMG US and Latin America Regional Managing Partner for Tax and Legal Services at KPMG Americas.
“This could be a big miss. A tax-first mindset, combined with a data-driven, connected-thinking approach, can aid business executives to better understand how different factors interact and impact supply chain decisions.”
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