Large companies forced to innovate due to supply chain disruption: IFS study

GUEST RESEARCH: Two-thirds (66%) of large enterprises globally say they are keeping more inventory on hand compared to pre-pandemic times, according to research commissioned by cloud and enterprise software provider IFS, which surveyed more than 1,450 high-level decision-makers at large in France, Germany, the Nordic countries, the United States, the United Kingdom and the United Arab Emirates.

Nearly one in five in total (18%) say they keep “significantly” more inventory.

Seven in ten respondents surveyed (70%) said they have increased the number of material/product suppliers they use in response to recent supply chain issues.

Almost three-quarters (72%) of the survey sample said they had increased the proportion of materials/products they sourced from domestic suppliers due to these issues.

Rising regulatory burdens (highlighted by 15% as one of the biggest contributors to the current disruption to their business) and the need to leverage the many benefits of the circular economy make supply chain management more complex supply.

Ninety-three percent of respondents said their organization is embracing the circular economy today or planning to do so in the future.

Sixty percent say they face challenges in achieving their goals. They say they are developing goals, planning programs, or have their goals pending.

Even among respondents who are already embracing the circular economy, 23% felt that their customers’ expectations for circularity had no impact on or were detrimental to the customer experience, although over time the benefits of circularity are likely to become increasingly clear.

The survey indicates that many large companies have redesigned their supply chain in innovative ways to reduce the risk of disruption.

These include: offshoring to improve security of supply, keeping more inventory to ensure they can always meet demand, and increasing the number of suppliers they use to eliminate any may disappoint customers.

“Large companies are likely to incur significantly higher costs and other negative financial impacts as a result of the steps they take to mitigate disruption. Supply chain relocation will often require investment in raw materials or more expensive product components, especially when inflation picks up, while holding inventory will tie up large sums that might otherwise be ‘working’ for the business,” said IFS global industry director for the manufacture Maggie Slowik.

IFS research argues that adopting the circular economy is disruptive for many large companies, especially if their equipment and processes are not configured to deal with waste reduction and reuse and recycling of materials.

He says this is evident when taking into account other disruptions in macro-economic conditions such as COVID-19 or the war in Ukraine.

At the same time, the survey reveals that many large companies are suffering from a talent shortage.

Sixty-five percent of respondents say their organizations are struggling to fill vacancies (lack of qualified candidates and qualified talent being the most common reasons), and 39% believe that disruptions related to skills shortages in the within their organization will last beyond the end of 2022.

“Companies urgently need to find a solution that can help them manage this disruption, which with price volatility is increasingly intensifying, transition to a circular economy and solve the complexities of the supply chain. supply challenges we face today,” Slowik suggested.

“To do this, especially where skills are scarce, they will ultimately need to invest in technology that provides the agility and speed of analysis they need to better forecast demand. By tackling them now effectively and cost-effectively, they will put themselves in an excellent position not only to survive, but also to thrive long into the future,” Slowik concluded.

This first appeared in the CommsWire subscription newsletter on July 8, 2022.

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