We can’t wait to be TOGETHER AGAIN at the 2022 WBENC National Conference in Atlanta, June 7-9, 2022! To get you even more excited, we are providing inspiration, advice and insights from one of our Co-Chairs, WBENC-Certified WBE ALOM! All of our National Conference Co-Chairs, WBENC-Certified WBEs and sponsors have stepped up in a big way to help make the National Conference an amazing experience this year.
Any time there is change, upheaval, or new problems, there is opportunity. Most definitely, supply chain falls into the change and upheaval category. All businesses with physical goods are forced to think deeply about their supply chain strategies. As I am writing this, some of the world’s largest corporations are reporting financials that are being strongly impacted by supply chain disruptions.
Solve the supply chain problem and you have it made! Oh, wait! Did I mention that it is not easy?
As corporations are thinking about redesigning their supply chain, nearsourcing or reshoring are among the strategic tools for over 60%, according to a BCI study. Other studies have confirmed the numbers.
WBEs will be elated to learn McKinsey predicts that 26% of the world’s production volume may be impacted by the nearsourcing/reshoring trend.
US based WBEs will be extra excited to hear that 58% of the corporations are thinking about moving production to the U.S.
The main driver in this movement is avoidance of costly supply chain disruptions.
With 70% outsourcing major parts of their supply chain to China, uncertainty about deliveries from China, especially, are at the front of everyone’s mind. Recently, Keith Krach, former DocuSign CEO and now Under Secretary of State for Economic Growth, Energy, and the Environment, suggested that all boards should ask for a China contingency plan.
Other drivers are the lack of reliable freight and the huge increases in cost of freight. Finally, there is a sustainability element to the movement. The high environmental cost of transporting goods is weighing down on corporations as ESG reporting requirements become more regulated, in-depth and traceable.
WBEs and supplier diversity professionals have reason to be excited about the new opportunities as supply chain shifts.
Yet, as we start to ponder the solution to the problem, concerns pop up. By shifting to U.S. suppliers, we may eliminate some risk. But if those suppliers turn around and get their components and raw materials from overseas, they may themselves have disruption risk. Corporations may be willing to pay more if delivery is certain. But if delivery dates are still only “suggestions” that may change, they may just stick with their old suppliers. The entire supply chain ecosystem is dependent on global trade. With global trade running less smoothly, both due to geopolitics and due to logistics issues, it may make sense to create a more domestic supply chain. That, though, is a long-term plan. In the meantime, the name of the game is to eliminate risk, both by keeping prudent levels of buffer-inventory, selecting local suppliers where possible, and digging into risk on the tier 2, 3 and even 4, levels.
The biggest barriers to reshoring to the US are operating cost/lack of scale at US based suppliers, followed by lack of local supplier base.
To succeed in winning corporations over, WBEs must prove that they have reliable supply, can deliver at scale, and have capacity to meet requirements – both seen from a production capacity standpoint and meeting the requirements to do business with corporations – from cash to insurance, from staff to systems, from cybersecurity to reporting.
In the meantime, supplier diversity professionals can help the process by starting to create visibility to the cost of distance-sourcing as opposed to near-shoring. They can also help by making sure that there are not two different standards applied to overseas suppliers as opposed to domestic suppliers. This issue has become much discussed recently where domestic suppliers are asked to meet requirements that were never even discussed with overseas suppliers.
With the magnitude of opportunities created by these shifts, it is a huge but worthwhile effort. It is very possible that these new opportunities are the silver lining coming from the supply chain disruptions.