What’s the number one barrier to changing a sourcing strategy?
Companies are moving supplier bases to less risky locations but two-thirds are struggling to find reliable partners, according to a report. The report , by Reuters in partnership with Maersk, found 76% of survey respondents did not expect supply chains to normalise before the third quarter of 2023. Two-thirds (67%) of global retailers and manufacturers said disruption had changed their sourcing strategy, and companies were now prioritising shorter, more flexible supply chains with greater access to raw materials. Disruption has led to a “major rebalance” of global supply chains, the report said. Companies were moving away from highly-concentrated areas of production and towards locations closer to market, or to a wide range of low-labour-cost countries, in hopes of achieving the flexibility and resilience needed to reduce delays, transport costs and shortages of products on shelves. The report said the top 10 barriers to changing sourcing strategies were: 1. Finding reliable partners (66.3%) 2. Cost implications of changes (47%) 3 . High difficulty in reducing existing partnerships and supply chains (28.9%) 4. Stakeholder resistance to change (25.3%) 5. Competition in new sourcing locations (25.3%) 6. Labour shortages/Lack of expertise in new sourcing locations (22.9%) 7. Lack of infrastructure in new sourcing locations (16.9%) 8. Lack of facilities and or equipment in new sourcing locations (16.9%) 9. High inflation in new sourcing locations (16.9%) 10. Low geopolitical stability in potential new sourcing locations (13.3%) The report added: “We can see a new dynamic growing, where labour and reliable partners are increasingly sought after, as the trend of onshoring and nearshoring grows. “With more than a third of those looking at new manufacturing locations encountering a deficit of expert labour, and a quarter of companies that have transitioned sourcing experiencing competition in potential locations, it is clear that a premium on skills is developing that makes labour force capacity and educational levels a critical decision-making factor.” Companies saw numerous benefits from changing their sourcing strategy, the report revealed. The top reasons to shift supplier locations were: a) Shortening supply chains to increase flexibility (63.2%) b) Limiting risk across operations (57.9%) c) Limiting reliance on singular sources of materials (57.9%) d) Increasing control over operations (45.6%) e) Improving sustainability (43.9%) Most countries were reshoring their supply chains to be closer to their end markets (27%), the report found, but following this trend the top 10 countries to move sourcing to were India (21%), Vietnam (21%), Germany (14%), Poland (13%), US (12%), China (9%), Turkey (9%), Mexico (9%), UK (8%), and Indonesia (7%). This, the report explained, demonstrated a need to make supply chains shorter and more reactive, where the right mix of products, components and raw materials was available. In order to do so companies would need “invest into the infrastructure to produce, carry and hold inventory in this revised and more condensed supply chain network”. The survey involved 368 respondents in August-September 2022, mainly European supply chain professionals (57.1%). NOW READ
