The Next Phase of Supply Chain is Here. Are You Ready?

Dec. 5, 2022
Supply chain disruption remains a persistent challenge. Companies, especially in North America, are responding by rethinking global supply chain networks for greater resilience and flexibility.

Supply chains are in the global spotlight like never before. With inflation and economic uncertainty following from pandemic shutdowns, managing supply chain disruption has become a normal part of doing business.

At the same time, companies are recognizing that supply chain operations are a key part of the drive to reduce carbon emissions. As they adapt their supply chains in response, companies are also having to manage a massive talent shortage in manufacturing.

With all these challenges racking up, it’s not surprising supply chains are top of mind for manufacturing executives. The National Association of Manufacturers’ new survey on the biggest challenges facing manufacturers shows that 78% of manufacturing leaders indicate supply chain disruption as a primary business challenge. What’s more, despite a generally positive outlook for their businesses overall, only 10%of these leaders think current supply chain disruptions will improve by the end of this year.

Reframing the supply chain footprint
This persistent disruption is driving companies to rethink some of their most fundamental assumptions about global manufacturing. Resilience, flexibility, and sustainability are now the watchwords for supply chain managers. As such, the focus is switching away from low-cost offshoring and just-in-time manufacturing towards greater onshoring and nearshoring (“reshoring”), especially in the United States.

The striking findings of a recent Accenture survey bear this out. It found that 94% of North American companies are now planning to invest directly in onshoring or nearshoring. And more than half of all supply chain and manufacturing executives think building manufacturing capacity closer to home is essential for their companies’ survival.

Specifically, a large majority (85%) want their factories and material sources to be in the same hemisphere. Nearly as many (78%) want factories within four time-zones of the customer. And more than half (52%) want them less than 1,000 miles away.

This is a very different way of thinking about supply chains than we’ve been used to. In fact, only a tiny minority—1%—of companies believe they can continue to grow revenues and profits within their existing manufacturing footprint.

A different kind of supply chain
With findings like these, wide-scale change in supply chains is inevitable. But reshoring is only part of the equation. With the focus on greater productivity and efficiency as well as flexibility and resilience, many companies are looking to make their newly reshored factories far more digital and automated.

In fact, more than half of the companies Accenture surveyed said they’re combining large-scale digital transformation with their onshoring and nearshoring initiatives. This also has implications for workforce skill requirements. Automation and robotics need new kinds of technicians to support them, as well as data scientists and analysts to make use of all that valuable new sensor and supply chain data.

Such skills are already in high demand. In fact, two in five respondents to Accenture’s survey said automation and robotics technicians are the hardest roles to fill. And three-quarters of companies in the NAM survey said attracting and retaining a quality workforce was a key business challenge.

The implication? First, companies need to shift automation up a gear to address persistent manufacturing talent shortages. Second, they’ll need to rethink their approach to talent acquisition and retention to ensure they have the skills needed. For most, that will include a significant program of upskilling the existing workforce in key digital, automation, and data capabilities.

The next phase of supply chain
Manufacturers that can manage this transition quickly and smoothly are poised to transform their supply chain agility and resilience as well as their sustainability and competitive advantage. This is especially important as they continue the shift towards direct-to-consumer and e-commerce sales models.

For example, reducing freight emissions through reshoring can be a key weapon in reducing a company’s carbon footprint. And the greater flexibility provided by strategically siting highly automated facilities will be crucial in meeting growing demand for more personalized products, services, and experiences that can be tracked in real time and delivered exactly when and where they’re needed.

To meet these new requirements and expectations, supply chains need to be transformed and rearchitected. Ultimately, it’s about putting aside the traditional view of the supply chain as a cost center. It now needs to be seen as a vital source of future growth, profit, and competitive advantage—as well as a enabler of more customercentered and sustainable operations.