Home » 3PL/4PL, Breaking News » Pandemic reshaping, not reshoring, supply chains—report

The COVID-19 crisis is catalyzing the reshaping, rather than reshoring, of supply chains, with businesses focusing on transparency, resilience and collaboration to avoid disruptions, according to a new survey report from HSBC.

The report found that COVID-19 is not really accelerating retrenchment, deglobalization, and reshoring back to the home country. Instead, it is pushing businesses to reshape their supply chains to become more resilient, transparent and collaborative. There is also a continuing trend towards near-shoring to countries or areas closer to home.

The report surveyed over 2,600 businesses across 14 countries, markets and territories between April 28 and May 12, 2020, tracking actions they are taking to weather the crisis and seize emerging opportunities in the new normal.

The investment bank’s report found that businesses are moving to reshape their entire supply chain by variously pursuing diversification, digitization and vertical integration to avoid any single point of failure.

It found that 67% of businesses are prioritizing increased control of their supply chain through greater emphasis on supplier resilience to prevent and detect disruption.

This involves identifying and securing critical suppliers (31%); reviewing suppliers’ ability to withstand future uncertainty (30%); working with markets/countries that are more stable (26%); and owning more of the supply chain (vertical integration) (22%).

Meanwhile, 44% of businesses said their top priority was increasing the transparency of their supply chain to enable sustainability, traceability and resilience.

This is being done by increasing transparency in how their suppliers work—and who is in their supply chain (27%), and creating a more traceable supply chain (26%).

“Through mapping suppliers and buyers, companies can unearth hidden dependencies and plan for interruptions down to the component level,” said the report.

The report also discussed what changes businesses plan to make across primary suppliers in the next one to two years. About 29% saw the need to diversify their supply chain so they can work with more suppliers. About 28% will digitalize more of their supply chain, and 20% plan to increase intra-regional trade.

The research also found that 41% percent of businesses said they will digitalize processing and adopt paperless documentation, and 21% will utilize 3D printing technology to enable more production on site.

But while the data suggest restructuring will result in vertical and horizontal integration, companies are not turning inward but are diversifying.

Fewer than 1 in 5 (17%) are narrowing geographically across markets, and 1 in 5 are not reshoring but looking to expand suppliers within their region as a strategy to grow.

“Together, these steps could help mitigate the risk of one company or country being cut off,” noted the report.

Production moving closer to point of sale is a medium-term trend, aided by advances in robotics, AI and 3D printing. The data show steady investment in automation over the next few years, and it is the top development priority. This may see supply chains shorten in time to operate on a more regional basis.

At the same time, businesses have also supported the companies they work with.

“Businesses feel closer to their suppliers and have taken active steps to support partners. This collaboration facilitates the control and transparency businesses are seeking to become more resilient,” said the report.

Of the surveyed, 26% said they have collaborated to get products to customers, 25% have offered better payment terms, 26% have given advice to other companies, and 25% have shared information.

As well as helping each other, 32% of businesses have changed their products or services to support COVID-19 relief efforts.

Photo by Norma Mortenson from Pexels

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