What Keeps CFOs Up at Night: Rethinking Supply-Chain Globalization
The beginning of the pandemic saw a shortage of Personal Protective Equipment – primarily due to a supply chain disruption as the world’s economies shut down.
Now, as the U.S. economy continues its ups and downs as it makes its way to recovery, many of the things for which the public clamors – new and even used cars, technology, etc. – also are in short supply and/or are much more expensive due to, yes, continued global supply chain disruption.
CFOs were rethinking the global eco-system even as early as Q2 2020
Deloitte’s CFO Signals for the second quarter last year found that about 40 percent of CFOs surveyed expected that supply chains would become more diversified post-pandemic.
Yet, as much as it may feel in many ways that life is more normal than a year ago, we’re not in a post-pandemic world yet, and so the supply chains continue to pester the public and company financial leaders now in Q3 2021.
Deloitte’s report last year said that “this quarter’s findings indicate that many management teams remain focused more on ensuring viability and adapting for near-term performance” than focusing on changes that would limit global supply chain disruption post-COVID.
And CFOs are definitely rethinking “supply chain as usual”
Financial executives are rethinking how just-in-time is used and are looking more and more to keeping stock on hand. After all, having more stock on hand increases “resiliency,” this often is much more important than saving the cost of having to store the “excess.”
Customers who are unhappy that they can’t receive items when they want it could move to a competitor who has what they want in reserve. Businesses also could miss out on growth opportunities without extra product as the economy’s recovery smooths out.
Strategies to decrease reliance on supply chains
- Explore “near-shoring.”
Consider transferring more business operations closer to the U.S. For example, instead of using suppliers from China, look to those in Canada or Mexico. Of course, the less your products can be manufactured using automation, the more expensive they may become if created closer to home. But it is something to consider.
Note that Gartner found in June 2020 that 33 percent of manufacturers surveyed already were either planning to move from China by 2023 or seriously thinking of it.
- More frequent forecasting
Forecast frequently and consider moving to a monthly stock-keeping-unit level. Then compare stock to actual sales to improve forecast accuracy. Obviously, the more accurate your forecast, the better resilience you’ll build into product stock needs.
- Share the problems with others.
Let internal stakeholders and even outside partners know of your issues. Consider creating risk-sharing agreements or even joint continuity programs with outsiders that can help you keep goods in stock.
- Clearly understand how your supply chains drive your business.
Doing so lets you see how it supports your business while allowing you to see where its holes may be – helping you better respond to disruptions.
For example, knowing that how much of the products you sell rely on a just-in-time supply chain could help you understand which ones to shift to storing in nearby warehouses, or asking a near-shore manufacturer to make them, and so on.
If anything, it would provide you an overall picture of how the various supply chains affect your business, allowing you to make strategic decisions quickly, as needed.
- Invest in technology such as predictive analytics.
Tech that helps you ascertain risk management, forecast for advanced/demand planning, and visualize results for different supply chain scenarios can prove their value quickly. Data Analytics is one of the most critical drivers of success. Information-driven organizations outperform their non-information-driven counterparts. If predictive analytics is in your future, inquire about The Intersect Group’s Business Intelligence CoE for data and analytics brainstorming, best practices, and advice.
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