Gartner Sees 87% of Supply Chain Pros Eyeing Resilience Investments

February 11, 2021

Continued Uncertainty and High Customer Expectations Challenge Chief Supply Chain Officers to Find New Trade-Offs Between Cost, Speed and Service

A global Gartner survey of more than 1,300 supply chain professionals found that 87% of respondents plan investments in supply chain resiliency within the next two years. The survey, conducted from September 2020 through November 2020, showed that even more supply chain professionals (89%) want to invest in agility (see Figure 1).

However, cost remains a priority, challenging chief supply chain officers (CSCOs) to find a new balance between resiliency, cost-efficiency and fulfilling increasing customer demands.

“Supply chain executives overwhelmingly recognize the necessity to make their networks more resilient and agile,” said Geraint John, vice president analyst with the Gartner Supply Chain practice. “At the same time, 60% admit that their supply chains have not been designed for resilience, but cost-efficiency. The challenge will be to create an operating model for supply chains that combines the best of both worlds and also delivers supreme customer service.”

Gartner defines resilience as the ability to adapt to structural changes by modifying supply chain strategies, products and technologies, and agility as the ability to sense and respond to unanticipated changes in demand or supply quickly and reliably, without sacrificing cost or quality.

Figure 1: Responding to a Disrupted World

Source: Gartner (February 2021)

Three-quarters of respondents believe that the additional costs caused by the investments in resilience and agility will be covered by the supply chain budget. That’s why CSCOs must take the lead in identifying where and how much to invest.

“In practice, the concrete investments will likely be a series of activities ranging from incremental projects in small firms to transformative capital investments by global industry leaders,” Mr. John added. “We see that many organizations are investing in diversifying their supply base and redesigning products to mitigate risk. More collaborative relationships with key customers and suppliers is also a priority for almost all respondents.”

National Interests Clash with Competitive Pricing Demands

Especially high tech, healthcare and pharmaceutical organizations report that national interests will have increased influence over future supply chain decisions. This does not only refer to imminent national needs, such as vaccines and personal protective equipment, but is also a result of ongoing issues, such as the U.S.-China trade war or Brexit.

At the same time, 45% of survey respondents think that their customers favor low pricing over domestic sourcing and production – particularly in industries with ferocious price competition, such as retail and fashion. Cost differentials and cost-efficiency will remain key considerations for these supply chains – as for others – when evaluating any redesign of their operational networks. Almost half of survey respondents see lean methodologies, just-in-time systems and low-cost country sourcing as relevant to future strategies.

Only 30% of survey respondents report that they are shifting from a global to a more regionalized supply chain model. The high level of integration in global supply chains, the regulatory burden of moving already established supply chains to a different location and the concentration of key suppliers in certain geographies make it difficult to completely regionalize a supply chain network. Further, high labor costs and a shortage of skilled manufacturing workers have long been an argument against domestic production in developed Western economies.

Automation as the Key to Domestic Manufacturing

Advanced robotics and other automation technologies provide opportunities to overcome this constraint. Fifty-six percent of survey respondents think that automation will enable them to make onshore manufacturing economically viable.

“Ultimately, the right balance between investments in resilience and agility, and cost-optimization depends on each organization’s individual circumstances, including their financial strength, market position, appetite for risk and external factors such as regulatory requirements or supply chain constraints. If CSCOs choose their investments wisely, they can expect to see positive results as soon as the next disruption,” Mr. John concluded.

Bob Bova, CEO and President of AccuSpeechMobile added, "Supply chain professionals are faced with rising customer and technology demands and understand that automation and agility are cornerstones for upgrading their networks and infrastructure. Voice automation can provide measurable benefits to these ends, integrate within weeks and provide a low cost, fast return on investment scenario to accelerate production and stay flexible respective to future growth and new application integration."