According to Gartner, over the past two years, 74% of supply chain managers have changed the size and number of locations in their supply chain network. Fifty-one percent of respondents said they had increased the number of locations.
As constraints, inflation, sustainable development goals and national industrial policies put global supply chains under pressure, supply chain managers (CSCOs) are adapting their networks to adapt to this new environment.
“There is clearly a supply chain overhaul underway, but not everyone is moving in the same direction or even to the same extent,” said Kamala Raman, vice president of the chain practice. Gartner procurement. “Supply chain leaders have changed networks in a number of ways, whether with extensions, consolidations, or simply buffer changes – which are more reversible than footprint decisions.”
The resulting networks span a variety of operating models. Twenty-eight percent of respondents now describe their network as a hybrid regional model – a combination of local or regional elements in a global supply chain network. It is closely followed by global models with regional final assembly (23%) and local networks for local (22%).
“While the range of scales and approaches is wide, supply chains are definitely on the move. More than half of participating organizations report making changes to manufacturing and supplier networks that account for at least 20% of revenue,” Raman added.
China and Asia remain popular as supply bases and end markets
In the supply chains present in China, change is also underway. A total of 95% of respondents are evaluating or executing changes in their China sourcing and manufacturing strategy, and 55% of them have already implemented their plans.
However, the survey data does not show strong signs of large-scale offshoring to developed markets. Supply chain organizations are looking at a China plus one approach that leaves most of the China-based network untouched and places net new additions in other markets, or a diversification strategy that still holds sourcing or manufacturing important in China.
Due to diversification away from China, many countries in the rest of Asia are benefiting from new net foreign direct investment. There are also regionalized Asian networks that are stimulated by coordinated industrial policies, such as the Regional Comprehensive Economic Partnership (RCEP) or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade agreements. Among APAC respondents to the survey, 60% consider their home region not only as a supply base, but also as an end market. Overall, 40% of respondents view APAC as a supply base and end market.
“There are clear signs that in a fragmented world, global enterprises have made changes to their one-size-fits-all, highly cost-optimized networks, and now favor a mix of global, regional or local elements. Investments in other parts of Asia – outside of China – coexist with increased investment in developed markets, as organizations take advantage of generous business incentives at the national/trading bloc level,” Raman concluded.