In the last few years, the global supply chain has become accustomed to disruption and uncertainty. New survey data from Coupa Software who are a leader in Business Spend Management (BSM), warns consumers of continued supply chain disorder, as 91% of UK supply chain leaders anticipate disruption will worsen or stay the same over the coming months.
UK supply chain leaders are facing a myriad of challenges; attributing supply chain disruption to an ongoing combination of geopolitical uncertainties (54%), increased costs in relation to transport, production and raw materials (51%) Covid-19 related issues (50%) and material shortages (42%). Over the past year, labour shortages (37%), raw material and component shortages (35%) and unreliable shipment lead times (33%) were the key signs of financial and operation distress.
With disruption expected to continue or worsen, consumers should prepare for sustained impact on essential items over the coming months. Currently, 34% of UK supply chain leaders anticipate continued shortages of goods and critical parts in the supply chain within the next 6-12 months. Fuel (24%), food (27%) and computer chips (10%) are the top three products that supply chain leaders expect to be most affected. When it comes to the biggest challenges that organisations expect to face, keeping transportation and shipping costs down (15%), managing shrinking budgets (14%), and dealing with internal shortages (10%) were cited as the top issues.
“Consumers continue to face a barrage of shortages of essential goods and are growing impatient with the continued impact on their daily lives. Over the last twelve months consumers have faced shortages from cold and flu medicine to fruit and vegetables, and everything in between,” said Dr. Madhav Durbha, Vice President of Supply Chain Innovation at Coupa. “With climate change and geopolitical tensions expected to impact food and cause disruptions, now is the time for supply chain leaders to take initiative and be creative as to how they can invest and improve their operations.”
Preparing for disruptions ahead
Despite proven delays and disturbances, UK businesses are still falling short on implementing contingency plans for potential future supply chain disruptions. While over half (61%) have employees looking into contingency planning, only 24% of businesses have implemented targeted task forces and 15% are not addressing contingency plans at all. Contingency planning within supply chains isn’t just about preparing for a major crisis, it can also be about preparing to target persistent problems relating to areas such as labour, product and transport.
With expectations of continued supply chain challenges, it is paramount that leaders make an effort to rethink their supply chain processes and prevent the consequences consumers experienced over the last few years. One positive sign is that 77% of leaders surveyed indicated that their company plans to make future supply chain decisions based on national interest in domestic operations ensuring more effective and targeted approaches to decision making.
Digitisation and diversification will prove key to supply chain survival
The majority (78%) of UK supply chain leaders agree that investment will be an important factor in building more agile and resilient supply chains. However, currently, only 22% of UK supply chain leaders are digitising their supply chains, putting the UK behind France (36%), the US (34%) and Germany (30%). However, 38% plan to digitise in the next 6 months, while 18% are set to in the next year.
The findings also highlight that digitisation is viewed as a crucial strategy that could better help businesses to achieve their goals. Almost half (47%) of supply chain leaders are aiming to improve customer experience through digitisation, 46% to reduce overall risk, and 45% to ensure product availability for customers, increase supply chain resilience and increase digital security.
Investing in relationships with suppliers is also as key as the investment in tools and functions. More than a third (42%) agree that building healthier supplier relationships is the most important thing to improve supply chain issues. Suppliers are also central to several mitigation strategies companies are implementing or planning to implement over the next 6 to 12 months. 24% are reducing dependency on suppliers from any one region and 24% are relying on suppliers that are geographically closer to production and distribution facilities.
“As disruptions persist, it’s critical for organisations to prioritise improving their relationships with suppliers,” stated Durbha. “When supply gets constrained and capacities and materials go on allocation, suppliers tend to prioritise their preferred customers. Organizations are gaining this status as ‘preferred customers’ by collaborating with suppliers by providing visibility into their anticipated demand and ensuring payments happen on time.”
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