Inside Logistics

Three quarters of organizations will make major post-Covid supply chain adjustments

Supply base expansion, reductions in globalization, and increases to inventory levels are solutions cited in survey


June 12, 2020
by

BOSTON – Almost three quarters of supply chain professionals are now planning major shifts in supply chain and procurement strategy post-pandemic.

Nearly all (97 percent) of the 600+ professionals surveyed for the newly released How Now? Supply Chain Confidence Index experienced a supply chain disruption related to COVID-19.

In response, 38 percent of organizations are planning supply base expansion, 34 percent are contemplating reductions in supply chain globalization, and 21 percent plan increases to inventory levels.

When asked where COVID-19 had the biggest single impact on their supply chains:

  • 31 percent said decreased demand for products and services;
  • 26 percent reported lack of available supply due to production downtime and shutdowns;
  • 21 noted logistics and transportation slowdowns and delays.

“We expect to see seismic strategy changes in the months ahead that fundamentally alter the makeup of global supply chains,” said Tania Seary, founding chairman and CEO of Procurious which commissioned the survey.

“For decades, low-cost country sourcing and offshoring was the foundation of global supply chains. The pandemic has many executives considering reducing globalization – and for good reason. But these changes won’t come easy.”

Reflecting on lessons learned, 39 percent of those surveyed said they were blinded by a lack of supplier and geographic risk and 29 percent said they didn’t understand the upstream supply chains of their suppliers.

Fifty-nine percent of respondents believe the Fortune 500 should reduce globalization by localizing supply chains and bringing manufacturing back home.

Confidence Remains High, Despite Looming Uncertainty

Uncertainty around when the disruption will peak continues to loom. The study found that while 34 percent of business leaders believe the worst has come and gone, nearly half believe the peak impact will occur within the next six months.

“The message from frontline practitioners is that the end to these supply chain disruptions is not near. Most professionals believe the crisis will peak in or after June,” said Seary.

As a result, supply chain and procurement teams will continue to play a key role in recovery and resiliency initiatives. During the crisis, 40 percent of respondents said their recommendations were solicited more than usual internally, and 22 percent said they now have a seat at the executive table.

This growing platform has inspired a new generation of professionals to further pursue careers in supply chain and procurement. Procurious found that 62 percent of all respondents and 71 percent of millennials said their interest in procurement and supply chain has increased as a result of the pandemic.

“We found that most practitioners stepped up in a big way and responded effectively to a crisis that literally brought the world to a halt,” said Seary. “The spotlight on performance will lead to increases in budgets, tech investments and board-level involvement, and create new opportunities for practitioners to make their mark at the executive level.”

Analyzing employment trends, the survey found that 20 percent of supply chain and procurement departments experienced job cuts and 23 percent of departments were forced to take pay cuts. However, go-forward job confidence remains high. On a scale of one to five, weighted job confidence for the next 12 months is a 3.96—meaning employees are more confident than not.