Resilient Supply Chains: How Organizations Are Strategically Investing

Through your own experiences or conversations with industry colleagues, you probably already have a decent grasp on the various challenges across the supply chain and logistics industry — from constant disruptions to looming economic uncertainty.

And while that first hand grasp on current issues is helpful, sometimes it’s even better to get some hard facts and figures behind all of those hypotheses. That’s exactly what the Capgemini Research Institute did with its recent 2023 Global Investment Research.

Where Organizations Are Investing: The Research Methodology

This thorough report surveyed executives from 2,000 unique organizations across 15 countries to get an understanding of what investments companies are making against the current backdrop of a potential recession and other challenges.

The research used a combination of surveys and in-depth interviews with executives to gather as comprehensive of a picture as possible.

It also captured a huge assortment of industries including automotive, consumer products, industrial and capital goods, banking, insurance, retail, energy and utilities, public sector, life sciences and healthcare, telecom, media, and hi-tech manufacturing.

62% of executives admit that their organization is already experiencing a slowdown in business, felt most prominently in retail, insurance, and healthcare, which means many are cutting costs and are being extra judicious about where to invest.

However, there’s one area that many executives agree deserves continued investment and prioritization: the supply chain.

Supply Chain Takes Precedent: Findings From the 2023 Global Investment Research

Below, we’re sharing some of the key insights from this recent report to understand why and how organizations are strategically investing in more streamlined and resilient supply chains.

1. Organizations Are Increasingly Concerned About the Supply Chain

It goes without saying that the last few years have thrown a lot of wrenches into the supply chain and, as a result, executives aren’t letting their guards down anytime soon. In fact, the supply chain is still top of mind for the vast majority.

89% of executives see supply chain disruption as the biggest short-term risk for their organization. That means the supply chain is taking precedence over other pressing issues like the rising prices of raw materials, the energy crisis, higher taxes, and sustained geopolitical turmoil.

While the supply chain is a vital priority across sectors, the report found that supply chain bottlenecks are a particularly high risk for:

  • Industrial manufacturing (92% of executives agree)

  • Life sciences (91% of executives agree)

  • Retail (91% of executives agree)

  • Automotive (90% of executives agree)

The supply chain seemingly hasn’t settled into a “new normal” following the initial turmoil of the pandemic, as issues like the semiconductor shortage, restrictions on gantry cranes, and labor shortages continue to cause major hiccups. Those threats and disruptions have rightly positioned the supply chain at the top of the priority list.

2. Organizations Are Making Strategic Investments in the Supply Chain

Many organizations readily admit that their supply chains didn’t stand up to the challenges and demands of the pandemic. And for that reason, executives aren’t taking a reactive “wait and see” approach to the continued issues — they’re being proactive and funneling dollars into more flexible, resilient, and dynamic supply chains.

Capgemini’s research found that the supply chain is the area where organizations are planning to increase investment most strongly in the next 12-18 months, with 43% of executives saying supply chain investment will increase.

That puts the supply chain far ahead of other key investment areas like sustainability (33% of executives) and talent and skills (28% of executives).

But what does it actually mean to “invest” in the supply chain — particularly strategically? The research found that organizations are investing in two key areas: digitization and diversification.

Investing in Supply Chain Digitization

“It’s when times are hard that you invest in technology,” says Steve Miller, CTO of Steelcase, in the report. “It’s the one thing that helps you survive the storm.”

Indeed, many executives are looking to technology to help them maintain efficient and effective supply chains, even with the threat of continued chaos hanging overhead. Supply chain technologies support transparency, visibility, and connectedness to take a far more agile approach to supply chain management.

“There is a need to upgrade the control-tower model into an integrated and connected solution that provides improved visibility for the entire supply chain,” the report explains.

And executives agree. 72% of the report respondents say they’re looking to make significant technology investments to reduce long-term cost, while 59% say they’re making technology investments that will support faster decision-making.

Investing in Supply Chain Diversification

There’s nothing like a global pandemic and political unrest to shine a spotlight on the supply chain’s weakest spots — and the past few years have shown organizations just how breakable the supply chain can be. It felt like almost nobody was immune to the chaos.

According to the report, 75% of organizations globally have been impacted by facility closures, supply disruptions, employee absences, and the shift to remote work. And unfortunately, less than 20% said they are well-equipped to handle those challenges.

Organizations have seen firsthand the fallout from having all of their eggs in a single (and admittedly fragile) basket, so many are investing in more robust and diverse supply chains by taking actions like:

  • Onshoring or nearshoring to bring production bases closer to sources of demand (72% of executives)

  • Regionalizing and localizing supplier base (65% of executives)

  • Diversifying manufacturing base to reduce reliance on a single geographic region (62% of executives)

McKinsey research supports this growing push for diversification, with organizations dual sourcing raw materials (81% of respondents), increasing inventory along the supply chain (80% of respondents), and regionalizing the supply chain (44% of respondents).

The Supply Chain Takes the Front Seat

Organizations have an assortment of issues and challenges ahead, but there seems to be no priority bigger than building a more nimble and resilient supply chain — and leaders are investing accordingly.

As the report states, the most strategic organizations have shifted from perceiving the supply chain as a cost center to seeing it for what it really is: a revenue driver.

Ready to invest in technology and gain total visibility into your supply chain? Schedule a demo of project44 and chat with our team.