An increasing number of companies is developing strategies in order to proactively avoid disruptions or failures along the supply chain. The study “Supply chains: Security under pressure – cost-optimized supply chain management for increased resilience” surveyed 320 logistics decision-makers from various countries on the risk assessment and security of their supply chain – with interesting results, also with regard to the effectiveness of preventive measures that had been used.
The challenges of recent years have shown that companies are exposed to multifactorial events – their willingness and ability to change has become a decisive competitive factor. How empowered are responsible parties to act when their supply chains are exposed to disruptions? How can they react flexibly and reliably to short-term changes in the market? The Herchenbach Supply Chain Institute is investigating this issue. The recent study “Supply chains: Security under pressure” is a new edit of the survey conducted during the pandemic year 2021: Participating companies from Germany, France and the UK were once again asked questions related to their supply chain security in order to conclude which measures for strengthening the supply chain are considered to be particularly effective. On behalf of the study, 320 decision-makers from key industries with a focus on logistics and transportation were surveyed.
Increased energy prices are most severe challenge for companies
In a first step, the study inquired about the risk factors that impact the decisions of logistics managers. While two years ago it was the pandemic (85 percent) and changing customer and legal requirements (75 percent each) that companies identified as the most relevant challenges in their supply chain management, the focus has shifted significantly in the new survey. Now, it is primarily increased energy prices (69 percent) and inflation (68) that shape the supply chain decisions of the companies surveyed – the pandemic, on the other hand, is not even considered to be supply chain-relevant by one in three study participants (29 percent). Furthermore, shortages of raw materials and supplies (49 percent) as well as customer needs (40 percent) and cyber-attacks (34 percent) are cited as challenges.
However, the vulnerability of supply chains to disruptions has come into focus as a result of the pandemic and has brought preventive measures and risk monitoring to the agenda. Hence, the topic of security is seen as significantly more important for supply chains in a two-year comparison. Approximately three out of four respondents (76 percent) state that they have become more sensitive to issues surrounding supply chain security and consider regular stress tests to be useful – the approval is significantly higher compared to 2021 (60 percent).
Study shows: Companies rely on these preventive measures
In order to design their supply chains future-proof, many companies strategically plan preventive measures: One in two (50 percent) companies execute continuity planning, compared to only 40 percent two years ago. The study also asked logistics decision-makers which factors they consider to be particularly effective in counteracting disruptions in the supply chain. Accordingly, the six measures rated as most effective were:
- Search for suppliers within own country (local sourcing)
- IT-based monitoring of the supply chain
- Expansion of the supplier base
- Increase in inventories
- Regular stress tests
- Contractually agreed minimum inventory with suppliers.
Above all, expanding the supplier base is rated by 80 percent of the study participants as a measure with a high or at least medium level of effectiveness, followed by finding suppliers in one’s own country and IT-based monitoring of the supply chain (both 79 percent).
However, not many companies have actually implemented the measures they identified as effective for strengthening the supply chain. Only slightly more than a third of respondents (38 percent) have established relationships with suppliers in their own country, and about the same number are planning to do so in the future (36 percent). The implementation of IT-supported monitoring of the supplier network is also lagging behind: 35 percent have already implemented it, while only around a quarter of the study participants are planning to do so (28 percent) over the course of the next two years. Only 34 percent have contractually agreed on a minimum stock level with their suppliers, while 37 percent are at least planning to do so.
Priorities along the supply chain: cost reduction as dominant factor
According to the study, cost reduction is the decisive factor for many companies when designing supply chains and implementing measures: Across all countries, 38 percent of respondents see cost as the dominant factor for setting priorities, followed by security and speed (27 percent each). However, differences show when the statistics are broken down by country: While in Germany the aspect of safety is given the highest priority, in the UK it is the cost factor (56 percent) that determines decisions. Surprisingly, according to the survey, for only a few companies does the topic of sustainability have an influence on the design of supply chains.
With its study, the Herchenbach Institute aims to show how the risk potential has changed following the pandemic and the current geopolitical unrest. Among other things, the two-year comparison is intended to illustrate which issues have become more important for companies and which measures they consider effective in order to be able to respond flexibly to future challenges. In this context, strategic supply chain management is once again becoming a decisive advantage for success: with professional risk management, companies can make well-founded forecasts, take measures at an early stage and increase the resilience of their supply chain in the long term.
The complete study with detailed results is available here.