Companies move to diversify supply chain post-pandemic and reduce reliance on Far East, finds BCI survey

Credit: BCI

More than half of organisations around the world surveyed by the Business Continuity Institute (BCI) intend to diversify their supplier base post-pandemic, with the Far East set to be the biggest casualty. The research also shows that although most organisation did not have a plan in place to deal with Covid-19, the crisis has sparked due diligence further into supply chains.

The BCI’s Supply Chain Resilience Report 2020 focuses on Covid-19 and is based on a survey of 353 respondents from 77 countries and 19 sectors. Those polled include risk managers and business continuity experts, as well as people from a range of other roles.

The survey found that 57.2% of respondents are looking to diversify their organisation’s supplier base post-Covid-19.

The Far East looks set to be the biggest loser, with 29.9% of companies planning to reduce their reliance on the region. A further 13.1% are looking to do the same in China.

Meanwhile, two thirds of organisations (66.2%) plan to source more goods locally post-pandemic, with a fifth (20.8%) reporting they will move a considerable number of suppliers locally. A fifth also said they will stockpile more after the pandemic.

The survey also found that slightly less than half (49.5%) of organisations felt they had a plan place to adequately cover supply chain issues during the pandemic.

As a result, the majority will now make changes to their plans going forward. Some 53.2% will write a specific pandemic plan that includes supply chain risk in more detail. Another third will alter their generalcontinuity plans to strengthen supply chain-specific elements.

The survey also found that nearly two thirds of organisations plan to perform deeper supply chain due diligence going forward. The BCI says the survey showed that although organisations had largely carried out good levels of due diligence among tier one suppliers, this started to tail off beyond tier two.

The change towards more proactive supply chain risk management is hardly surprising, given that 73% of organisations polled by the BCI encountered some or significant detrimental effect on the supply side from Covid-19. Meanwhile, 64.8% reported the same on the demand side.

One in five organisations, however, reported increased demand for their products and services. IT, telecommunications and pharmaceutical companies, for example, noticed an uptick. Other organisations reported launching new products and services geared to catering for differing customer needs during a pandemic.

The survey also revealeda discernible increase in the use of technology during the pandemic to help with supply chain planning and strategy. Some 57.1% of those surveyed are using their own internal systems and spreadsheets for supply chain mapping. The BCI notes that this is a “notable uptick” on the 22.6% recorded in the BCI’s Supply Chain Resilience 2019 report.

In addition, 13.5% of respondents this year said they are using specialist supply chain tools. A fifth currently not using any tools are now considering doing so.

The survey also showed that 12.4% of respondents intend to increase their use of third-party logistics post-Covid-19.

“Third-party logistics can help negate the need to employ large numbers of warehousing staff on payrolls which, during a pandemic, is more of a risk than an asset to many organisations. Using a third-party provider also helps to negate the need for an organisation to build out its own supplier network at a significant cost,” states the BCI in its report.

BCI chair Tim Janes says that while global supply chains have been “severely disrupted” by the pandemic, many of the survey’s responses provide “room for encouragement”.

“Several of the results indicate signs of organisational and industry-level resilience coming from existing plans and arrangements, the innovative response that organisations have created in the midst of the chaos, or the ideas for future improvements,” he says.

The report notes that as most organisations are now shifting towards recovery, the ability to be agile and innovative with supply chain strategies has meant many have been able to continue to operate with little or no disruption to supply chains.

But there are clearly still challenges that must be overcome by some organisations in order to return to some degree of normality, it adds.

The report explains that many organisations are considering incorporating the increased level of supply chain due diligence of the past six months into their longer-term planning.

“Some of these changes can only be positive: the BCI’s Supply Chain Resilience 2019 report showed that disruption-causing incidents occurring with tier two and tier three suppliers were increasing, and general reporting and analysing of supply chain disruptions still needed considerable attention. The lessons learned from Covid-19 disruption should help to rectify some of these issues going forward,” states the report.

“Indeed, Covid-19 has certainly helped to magnify supply chain issues that had, until now, gone unnoticed within some organisations. This has forced them to make drastic changes to their supply chains in the past six months that would have otherwise taken many years; something that should be regarded as a positive step for the industry,” it adds.