BDO warns 'people want supply chain results, not excuses'
Businesses that allow tough market conditions to impact their supply chains face losing customers, who are no longer listening to excuses, warns BDO.
BDO is an international network of public accounting, tax, consulting and business advisory firms that form the fifth-largest accounting network in the world.
It has recently published its 2023 Manufacturing CFO Outlook Survey, in which BDO reveals that supply chain visibility is a priority for 42% of manufacturing Chief Finance Officers (CFOs). Other key findings include:
- 75% of manufacturers will increase or maintain investment in supply chain even if economic conditions worsen.
- New US legislation around supply chain means manufacturers need more visibility into their supply chains than ever.
- Other digital investments look like falling by the wayside, with just 36% of manufacturerslooking to invest in Industry 4.0 tech – down from 68% last year.
In an exclusive interview with Supply Chain Digital, the MD of BDO’s Supply Chain Advisory practice, RJ Romano, says of the report findings: “The message is clear; supply chain performance is pivotal for manufacturers this year.
“Customers aren’t listening to excuses about disruption anymore. They want to see improvements, and it’s on manufacturers to deliver them.”
Romano warns manufacturers that unless they prioritise supply chain visibility then they will fall foul of decreasing margins and falling market share caused by poor customer service.
He cites excess inventory – both in terms of finished goods and raw materials – as “a big challenge right now”.
Romano says: “Going from shortages to surpluses is difficult to navigate. Having clear visibility throughout the supply chain, especially from a planning and forecasting perspective, is key.”
His comments follow a tough 2022 for many global retailers. Nike was just one among many that held a global fire sale, as it sought to clear an epic inventory glut that the company blamed on late deliveries and earlier ordering by retailers.
Romano also says that, in the US and beyond, a game-changer for manufacturers are the Uyghur Forced Labor Prevention Act (UFLPA) and the Customs Trade Partnership Against Terrorism (CTPAT).
New US supply chain laws having big impact
The UFLPA spells out the following: “Any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region are not entitled to entry to the United States”.
Penalties for a UFLPA violation are high, involving civil or criminal penalties, or both. Impacted goods seized at the border, and the resulting disruption and reputational damage is severe, and lasting.
The CTPAT, meanwhile, is a US Customs and Border Protection cargo enforcement strategy designed to strengthen international supply chains and improve United States border security.
Romano says of the law changes: “Imports from Xinjiang will be permitted only if the Commissioner of US Customs and Border Protection determines that the importer has clear and convincing evidence that the goods were not produced using forced labour.
“Complying with these regulations requires manufacturers to have a new level of visibility into their supply chains and their suppliers’ operations. Technology can help enable this visibility, and failure to comply can be extraordinarily damaging to their businesses.”
Romano says it is “far better to invest in supply chain visibility now than pay the price for non-compliance later”.
He also points out that ongoing problems in the labour market remains an issue for manufacturers.
“Labour continues to be an issue and will be for the foreseeable future,” he says. “As companies expand their manufacturing operations to meet demand, the increased commitment to automation and technology has never been more important.”
“Fortunately,” he adds, “manufacturers seem to be taking supply chain needs seriously.”
Below are some of the other findings from BDO's 2023 Manufacturing CFO Outlook Survey.