A Gartner survey of 260 global supply chain leaders, conducted in February and March, revealed that 33% had moved their sourcing and manufacturing activities out of China, or had plans to do so by 2023.
“Global supply chains were being disrupted long before COVID-19 emerged. Already in 2018 and 2019, the US-China trade war made supply chain leaders aware of the weaknesses of their globalised supply chains and question the logic of heavily outsourced, concentrated and interdependent networks,” said Kamala Raman, Senior Director Analyst with the Gartner Supply Chain Practice.
Tariffs imposed by the US and Chinese governments over recent years have increased supply chain costs by up to 10% for more than 40% of organisation. For more than a quarter of the respondents the impact was even higher.
“As a result, a new focus on network resilience and the idea of more regional manufacturing emerged. But this kind of change comes with a price tag.” Some 58% of respondents in Gartner’s survey agreed that more resilience also results in additional structural costs.
Popular alternative locations for supply chain companies include Vietnam, India, and Mexico.
Moving forward, advancements in automation could see more companies establish operations closer to their markets.
“Many Western organisations will have to explore new forms of automation on the factory floor to decrease the costs of near- or onshore production. Some also favour a partial option, such as manufacturing in Asia and moving only the final assembly closer to the customer,” Raman said.
