Seventy-three percent of companies have added or removed production locations from their supply chain networks in the past two years, according to a recent survey by Gartner, Inc.
"Supply chain leaders are moving away from an overreliance on low-cost networks and are instead focusing on diversified approaches to mitigate risks and enhance performance," says Vicky Forman, senior director analyst in Gartner’s Supply Chain practice. "While cost-efficiency is still a prominent concern, CSCOs are taking a wider view of the costs associated with the impacts from disruptions and poor levels of resiliency when making network design changes."
Key takeaways:
- The most frequently cited changes to supply chain networks, half of respondents cited adding new supply locations with existing supply partners, while 48% cited pursuing new supply locations with new supply partners. The addition of supply locations is a strategy companies often deploy to serve multiple purposes, including diversification, achieving cost-efficiencies, mitigating geopolitical pressures and improving efficiency.
- Among organizations that have made supply chain network changes in the past two years, 90% reported that they have met or exceeded the expected benefits of the change.
- 96% of respondents cited challenges with operating in new locations.
- While operational and logistics costs were most often cited in the aggregate, there were important regional differences emphasized by supply chain leaders, such inadequate logistics infrastructure was challenging for new capacity added in India; a shortage of factory workers in North America; and complexity in complying with local regulations in South Asia, Africa, and Central and South America.
“There has been a clear trend toward adding network locations in the past two years, but beyond that there is significant variation in strategies depending on the size, industry and location of the company in question,” says Forman. “Successful companies have reconfigured their global supply chain networks to take advantage of new incentives, while diversifying away from concentration risk.”
