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Majority Of Australian Businesses To ‘Localise’ Supply Chain

The majority of Australian businesses will commit more resources to buying products and materials locally as they batten down the hatches in the wake of Covid-19, according to the 2020 Protiviti Finance Trends Report.

The report reveals that 52% of Australian businesses intend to proactively reduce their reliance on imported products and materials – a significantly higher figure than the 43% of companies that made the same pledge globally.

The Protiviti report also found that 47% of Australian businesses will look to diversify their supply chain to other regions, 44% will move away from just-in-time sourcing, and 53% intend to enhance third-party risk management and oversight of supplies.

The report mirrors the findings of a YouGov poll conducted on behalf of the Australian Workers Union in June, which found that 88% of Australians believed the country should ramp up manufacturing of essential products and reduce its reliance on imports from China.

Craig Bretton, Managing Director in Business Performance Improvement and Change Transformation at Protiviti, said sourcing materials and products locally will provide Australian businesses with a wide range of benefits.

“These include greater flexibility, greater control, reduction in supply chain costs, and giving organisations the ability to launch products faster,” said Mr Bretton.

“The disruption to supply chains has been felt across the globe. One of the most high-profile examples is the delays in Apple’s launch of its iPhone 12, which was delayed nearly two months.

“Australia imports $187 billion of goods annually and, when there are delays, it has a flow on effect to the majority of industries and then ultimately to the consumer.”

The Protiviti report surveyed more than 1,000 CFOs and senior financial personnel from across the financial, technology, manufacturing and retail sectors in Australia and globally.

Australian businesses reported greater disruption to their global supply chains than their counterparts in other countries, with 37% of Australian businesses compared to 28% globally saying their Business Process Outsourcing (BPO) and share service capabilities that were offshore had been significantly impacted. A staggering 87% of Australian businesses said they had been moderately impacted or worse during the pandemic.

“Westpac has been one of the most high-profile organisations to announce the shifting of 1,000 of its call centre positions back to Australia from India and the Philippines,” Mr Bretton said.

“During Covid-19 call centres have become the frontline of communication between customers and banks, with customers inundating centres with requests to defer payments on mortgages, credit cards and business loans. With lockdown restrictions, these centres have become lifelines for high-risk and quarantined consumers who have not had the option to visit a bank branch.”

The Protiviti report reveals that 70% of Australian businesses and 64% globally said they had experienced delays and disruptions with vendors and third-party suppliers as a result of the shift to remote working. “To improve commercial outcomes in a deteriorating market, a lot of businesses will need to renegotiate their commercial agreements with third-party suppliers,” said Mr Bretton.

According to the report, Australian financial organisations have tackled Covid-related disruptions in four ways:

  • 69% have moved outsourced work in house (55% globally)
  • 59% have appointed temporary contractors (54% globally)
  • 48% have waited for a third party to remedy the situation (48% globally)
  • 48% have engaged a BPO (40% globally).

The report also showed that there will be a move to automate critical business functions, with 48% of Australian businesses likely to increase automation compared to 36% globally. Of these businesses, 24% in Australia and 30% globally said they were very likely to boost automation.

Protiviti’s report is one of the most in-depth studies of its kind both globally and in Australia. Of the Australian businesses that participated in the survey, 42% turn over between $100 million and $500 million, 34% between $500 million and $1 billion, and 17% in excess of $1 billion. Of the respondent companies, 68% are privately held and 32% publicly held, while 50% have a national footprint and 22% a global footprint.

Read the full Finance Trends Report here

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