88% of businesses need to build resilience to avoid future supply chain disruption
A new report published this week by global consultancy partnership Kearney, and the World Economic Forum, has found that only a minority (12%) of leading companies globally are sufficiently protected against future disruptions in supply chains and operations. The remaining 88% urgently require additional measures aimed at building resilience, with 52% of businesses in this group considered mainstream players while 36% are ‘resilience laggards’.
A variety of drivers are affecting companies’ resilience. Around three-quarters of executives globally (76%) indicate Covid-19 as a significant disruptor, although this was less felt by executives at UK companies (40%).
Meanwhile, emerging technologies, geopolitical tensions, trade barriers, political uncertainties, social injustice and the implications of climate change are also acting as barriers to resilience building for many firms globally. For example, among UK companies in particular, the majority (84%) of executives believe geopolitical tensions will be disruptive to their company’s value chain within the next five years. Furthermore, executives globally expect the impact of disruption on corporate value to increase by 15-25% over the next five years.
Despite its challenges, Covid-19 is helping to prompt change in this area, with 60% of executives surveyed in this report saying that the crisis has encouraged them to pursue long-term resilience and prepare for future disruptions. Additionally, 75% see the pandemic as a dress rehearsal for further disruptions to come.
However, the majority of companies will require support when it comes to building long-term resilience in a variety of key areas. Consultations with senior executives in operations and supply chain suggest that resilience in product portfolio, customer orientation, financial viability and go-to-market channels is needed if businesses are to satisfy customer demand. Furthermore, resilience in logistics, manufacturing, suppliers and planning is also necessary so that companies can secure the supply to be able to run production.
Only 12% of those surveyed by Kearney said they have heavily invested in their customer orientation, while a mere 14% have mastered the development of a robust logistics system, for example.
The report revealed that 12% of companies representing a healthy mix of industries and regions were classed as ‘resilience leaders’, consistently outperforming the remaining 88% across all areas of resilience, further indicating the importance of resilience in securing a strong and future-proof business model. No company in any single sector or region is insulated from supply chain disruptions and, as such, every business needs to adopt the relevant strategies that will help them tackle this.
“Although the world is opening up, the challenges from Covid-19 are far from over, from ensuring safety and security on the shop floor and facing supply and demand disruptions, to accelerating digital transformation and re-skilling to build resilience,” commented Per Hong, Strategic Operations Partner and leader of the study at Kearney. “So far, we have explored where resilience leaders are excelling and observed how companies can chart their own path; however, no company can manage the repercussions of large-scale disruptions alone. This is where collaboration between different players in the ecosystem becomes vital to enabling a rapid response.”