Strength in numbers: North American businesses should partner for supply chain success
A 2021 executive order issued by US President Joe Biden sought to address the vulnerabilities of US supply chains exposed by the Covid-19 pandemic.1 A White House report in the same year found that a majority of businesses continued to experience major disruptions over the 12 months following the first outbreak.2
Among its key initiatives, the order mandated a drive for greater visibility and accuracy of supplier data. Against this backdrop, we surveyed 500 global business executives in the technology sector to understand the extent to which improvements to visibility, reliability and other supply chain qualities can enhance business performance.
The survey invited businesses to rate the performance of their supply chain and logistics against seven key criteria: cost, speed, reliability, resilience, visibility, decarbonisation and security. Their responses highlighted the historical outperformance of businesses with high-performing supply chains in respect of revenue growth.
Resilience is an underrated advantage in NA
A resilient supply chain can weather economic shocks, natural disasters, geopolitical volatility and whatever else is thrown at it, however unexpected. But less than half of the businesses in North America surveyed (48%), and even fewer in the rest of the world (37%) report that their supply chain and logistics are highly resilient.
Findings from the US government’s 100-day review3 of supply chains in industries with urgent problems, such as construction and semiconductors, identified some collective approaches to bolster resilience. Improving data availability and flow was high on the agenda as a means of helping markets work more efficiently and allowing firms to anticipate and prevent supply chain disruption.
Dealing with data fragmentation is an ongoing challenge for all nations, and can help mitigate supply chain bottlenecks, shorten lead times and better inform logistics decision making.
However, our research suggests that many businesses are not using some of the technology that is capable of resolving issues associated with data fragmentation. For example, just 27% of businesses based in North America use cloud computing for supply chain and logistics, only 26% use collaboration platforms, and even fewer (17%) use blockchain.
Reliable delivery is closely correlated with customer satisfaction and can be instrumental in promoting customer loyalty. According to our research, more than seven in 10 global businesses (71%) with high-reliability supply chains have improved customer satisfaction in the past three years, compared with only 47% of businesses with low-reliability supply chains.
Yet it appears that businesses in North America have not fully grasped the value of a well-managed supply chain. Cost control is still the top priority for these businesses over the next 12 months (49%), ahead of both speed (36%) and reliability (26%). This misplaced focus could be hampering their efforts.
For example, only 41% of businesses in North America agree that supply chains and logistics are a source of competitive advantage versus 52% of businesses in the rest of the world. Similarly, a minority of businesses (46%) in North America agree that a well-functioning supply chain and logistics helps deliver growth versus 55% of businesses in the rest of the world. This attitude will lead to self-defeating circular behaviour: while North American companies undervalue supply chain resilience they will neglect to invest in it and continue to miss out on the rewards of doing so.
Expansion of the supply chain increases risks
Global supply chain networks are increasingly complex, and so are the risks associated with them. Rising geopolitical tension tops the list as the biggest concern for all regions, cited by four in 10 global businesses (41%).
This sentiment is most pronounced among those surveyed in North America. More than half of businesses there (51%) cite geopolitical tensions as the top risk to their supply chain, versus 37% of businesses in the rest of the world. This reflects major developments threatening – or already disrupting – US businesses’ supply chains.
Cybersecurity also weighs heavily on the minds of supply chain executives in North America. For example, 38% of businesses in North America cite cyberattacks as their top risk, versus only 30% of businesses in the rest of the world.
The risk of suffering a cyberattack has more than doubled since the pandemic, according to the IMF,4 and countries like the US have borne the brunt.5 This could explain their heightened level of concern compared with businesses surveyed in other regions.
A supportive supply chain breeds success for all
Global businesses are working hard to cultivate strategic partnerships that can simplify and strengthen their networks.
Strategic alliances enable businesses to respond more swiftly to changes in demand, value chain shocks and other market fluctuations. However, our research suggests that North American businesses still need to wake up to this fact.
For example, nearly six in ten businesses in North America (58%) say their partners are solely focused on servicing their current needs, rather than innovating for the future, versus 51% of respondents in the rest of the world.
A transactional supplier relationship tends to favour price negotiations over collaboration. Such an oppositional dynamic can limit a business’s ability to tap into the expertise, technology and best practice of their supplier. Our research suggests that businesses in North America recognise the drawbacks of this approach and the power of more strategic, mutually beneficial partnerships.
Only a quarter of North America businesses (28%) say they are looking for a largely transactional relationship with their supply chain partners – almost 20 percentage points lower than businesses in the rest of the world (47%).
The systemic challenges facing today’s supply chains demand systemic solutions. Forward-thinking businesses understand that, to survive in a fluctuating commercial environment, they need to look beyond the walls of their own organisations. Offering and receiving help are no longer signs of weakness in business; rather, they are the way forwards.
To learn how your supply chain and logistics function can be a strategic enabler of success, read our full report, ‘The hidden power of supply chains: How supply chain and logistics can turbocharge performance in the technology sector.’
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