In the wake of the COVID-19 pandemic, supply chain management has seen substantial evolution, with many executives initially pivoting towards a mindset that prioritised resilience over cost efficiency. However, a recent survey conducted by EY among 347 supply chain leaders from companies generating annual revenues of over $500 million shows a significant regression in attitudes, revealing that many businesses have reverted to pre-pandemic priorities.
The EY survey indicates that a striking 88% of supply chain leaders feel that their Chief Executive Officers (CEOs) view the supply chain primarily as a cost centre. This shift appears to undermine the previously held belief that supply chain resilience was essential for future stability. While 90% of respondents assert that their CEO recognises the impact of the supply chain on financial performance, it is noted that 78% of organisations have returned to a focus on cost management in critical decision-making processes.
Ashutosh Dekhne, the Americas Supply Chain & Operations Practice Leader at EY, commented on this paradox, stating, “It’s all about making sure that costs don’t go up.” Following the pandemic’s disruption of supply lines, Dekhne noted that many manufacturers entered a phase of crisis management, simplifying their product offerings and now, as they attempt to diversify their portfolios once more, they face increased complexity and expenses, further fuelling a focus on cost containment.
The survey also highlights a developing complacency amongst supply chain executives. After navigating a series of disruptions, businesses may now feel secure in their operations, directing their attention towards the immediate challenges, such as rising costs, rather than preparing for potential future crises. According to Dekhne, those in chief supply chain officer roles have become the key advocates for innovative sourcing and production strategies, but their voices may not be achieving the desired impact. He remarked that these executives are perceived to have successfully "gotten everything back up and running," yet the depth of strategic vision may be diminishing.
While companies are beginning to explore nearshoring production away from China and Asia to better manage risk, Dekhne observed that only a handful are undertaking substantial efforts in this direction, often hesitating at the financial implications of such a shift. The survey further exposed discrepancies in attitudes toward technology integration, with 26% of C-suite executives admitting that digital connectivity efforts with suppliers are limited to basic methods such as email and spreadsheets, in stark contrast to 16% of supply chain leaders who feel similarly constrained.
Conservative attitudes towards significant investments in transformative technology were also noted. Although executives remain open to proposals about the potential value of such systems, they require assurances of tangible returns within a shorter timeframe. Dekhne highlighted a notable divergence in perceptions regarding the future of autonomous supply chains. While 25% of CEOs anticipate that their operations will be predominantly autonomous by 2030, a higher proportion of 39% among supply chain executives believe this transformation will occur sooner, suggesting some C-suite leaders may be underestimating the progress already made towards digital maturity.
Despite the recognised importance of interdepartmental collaboration and communication with external partners, the survey revealed that 39% of supply chain leaders rank proving the value of such collaboration as one of their top challenges. This lack of cooperation can inhibit a broader understanding within the C-suite of the supply chain's impact on overall business success. Although collaboration is essential for compliance with impending environmental regulations, larger systems for engaging with suppliers and customers have not yet materialised, exacerbating challenges in sharing forecasts and aligning business functions.
As the industry continues to navigate turbulent economic conditions, it appears a significant event may be needed to emphasise the necessity of shifting supply chain strategies away from an overwhelming focus on cost. Dekhne asserts that supply chain executives must bridge the disconnect within the C-suite in order to reassert their role and influence over future innovation and strategic direction.
Source: Noah Wire Services