Report: Seismic changes ahead for global supply chains

More than 70% of procurement and supply chain professionals say their organizations will make major changes to their supply chain strategy in a post-pandemic world, according to research from supply chain business network Procurious, released earlier this month. Changes include expanding their supply base, reducing globalization, and increasing inventory levels, the researchers said. 

“We expect to see seismic strategy changes in the months ahead that fundamentally alter the makeup of global supply chains,” Tania Seary, founding chairman and CEO of Procurious, said in a statement announcing the results of the survey, which polled more than 600 procurement and supply chain professionals around the world.

Almost all (97%) of those surveyed said their organizations experienced disruption due to Covid-19, citing decreased demand for products and services, lack of available supply due to production downtime and shutdowns, and logistics and transportation slowdowns and delays as the biggest hurdles. Geographic concerns ranked high as well, with nearly 60% of respondents saying that Fortune 500 companies should reduce globalization by localizing supply chains and bringing manufacturing back home.

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

The 73% of respondents planning large-scale changes to their supply chains say they will:

• Expand their supply base (38%)

• Shrink their global supply chain and rely on local suppliers (34%)

• Increase inventory levels (21%)

• Increase financing for key suppliers (9%)

CEOs responding to the survey were more likely to indicate that they will shrink their global supply chains, with 44% saying their companies will take such actions. Making those changes will require “significant investment, commitment, and trial-and-error to get right,” the researchers said.

The survey also revealed uncertainty around when the pandemic-related disruption will peak. More than a third (34%) of business leaders say the worst has come and gone, but nearly half (47%) say the peak impact will occur within the next six months. The remainder said they were unsure of when peak impact would occur.

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

United Kingdom-based Procurious collected 605 responses to its How Now? Supply Chain Confidence Index survey between April 28 and May 12.

For more coverage of the coronavirus crisis and how it's affecting the supply chain, check out our Covid-19 landing page.