Supply chain digitization won’t happen overnight and manufacturers are tepid when it comes to their faith that existing processes will hold up in the near term.
The majority of procurement executives surveyed in a recent study indicated “significant disruption” in their raw materials supply chains, with 67 percent saying the technology solutions they currently use are not likely to be able to handle the headwinds expected over the next three years.
“Rather than the global and pervasive supply chain issues in 2020 to ’21, current supply chain challenges, in general, appear to be more accurately described as regional, acute and even periodic in some cases,” Ivalua senior product marketing manager Doug Keeley told Sourcing Journal.
The survey, released this week, was commissioned by Ivalua, a Redwood City, Calif. cloud-based company that helps businesses manage their spending and supplier base. Customers within the fashion and retailing space that have used Ivalua’s platform include Louis Vuitton, Ikea and Cadillac Fairview.
“Supply chain strategies almost immediately began to evolve, sometimes dramatically, as organizations worked to find available and reliable supply in 2020,” Keeley said, pointing out the challenges in retooling supply chain strategies as it relates to resources, skills and capital among other factors.
While many companies diversified their sourcing, reshoring and other changes “may take more time” to implement, Keeley added.
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UBS analyst Chris Snyder said in a note released this month the continued challenges to the supply chain could drive U.S. reshoring.
“We think the continued disruption supports our call that the pandemic could serve as a catalyst for U.S. reshoring and broader investments in supply chain resiliency,” Snyder said in his note, which also pointed to investment in automation as another way companies might bolster their supply chains in the longer term. “Our view is that the benefit of outsourcing is in structural decline (cheaper labor) and the cost is more apparent than ever (supply chain risk), tilting the scales in favor of domestic production.”
The outlook among the 233 procurement executives surveyed by Ivalua in the U.S. and U.K. found 44 percent project supply chain challenges to start to slow by the end of next year.
The executives from companies using newer technologies were more upbeat on the supply chain disruptions and their relationships with suppliers and those companies’ abilities to meet deadlines, the survey found.
Companies that are in need of modernizing their digital solutions face issues related to the risks their suppliers face, too many systems for payments and shortfalls in spend analysis, according to the survey.
“We find that many organizations are still executing technology strategies now based on lessons sometimes painfully learned through 2020 and 2021 to improve supply chain resilience and agility,” Keeley said.
Potential issues during the technology rollout phase, shortage of skilled workers and managing change within an organization topped concerns of those surveyed when it comes to revamping supply chains.
There’s no shortage of surveys taking the temperature of executive sentiment across the supply chain, as new issues continue to materialize. Factors such as fuel costs, the war in Ukraine and labor issues, including the collective bargaining agreements in play for rail and the West Coast dockworkers, are seen as current risks fueling uncertainty.
Investment bank Carl Marks Advisors and SupplyChainBrain’s survey of 107 supply chain executives, released Monday, found companies are holding more inventory, diversifying their supplier base and routing cargo to less congested ports as means of managing through issues.
Those surveyed in the Carl Marks study estimated their supply chain costs to have spiked 20 percent to 60 percent over the two-year period ended in December.
Carl Marks Advisors managing director Peter Keogh pointed to Ukraine and the expected continue rise of fuel costs as weighing heavy on supply chains through at least this year. That, combined with fears of a recession could prolong uncertainty, Keogh said in a statement on the survey findings.
He went on to advise clients: “In this environment, it will be incumbent on organizations to review their sales forecasting, continue to monitor their on-hand inventory levels and revisit their procurement strategies.”