According to new research from Gartner, 73 percent of companies have added or removed locations from their supply chains over the past two years, with risk management surpassing cost as a key consideration in supply side planning since COVID.
The technological research and consulting firm surveyed 437 respondents from companies with annual revenues of at least $250 million, located in North America, Latin America, Europe and Asia-Pacific.
Half confirmed they have added new locations with existing supply partners, while 48 percent said they had pursued new supply locations with completely new partners.
The top three factors driving these changes include increasing resilience/redundancy as part of a risk management strategy (46 percent), improving agility or flexibility (43 percent) and reducing operational expenses/being cost efficient (41 percent).
Sustainability, future growth, regulatory requirements, streamlining and external geopolitical pressures round out the remaining reasons.
Vicky Forman, Senior Director Analyst in Gartner’s Supply Chain practice, said supply chain leaders are moving away from an overreliance on low-cost networks and are instead focusing on diversified approaches to mitigate risks and enhance performance.
“While cost-efficiency is still a prominent concern, chief supply chain officers (CSCOs) are taking a wider view of the costs associated with the impacts from disruptions and poor levels of resiliency when making network design changes,” she said.
Despite 96 percent of respondents citing challenges with operations in new countries, 90 percent said their supply chain changes had met or exceeded the expected benefits.
Benefits include improved service, cost reduction, enhanced agility and reduced carbon emissions, while difficulties varied depending on the region.
For new capacity added in India, inadequate logistics infrastructure was more of a challenge than logistics costs, while a shortage of factory workers was more common in North America.
Complexity in complying with local regulations was higher in South Asia, Africa and Central & South America than other regions.
“There has been a clear trend towards adding network locations in the past two years but, beyond that, there is significant variation in strategies depending on the size, industry and location of the company in question,” added Forman.
“Successful companies have reconfigured their global supply chain networks to take advantage of new incentives, while diversifying away from concentration risk.”
