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When it comes to supply chain disruptions, raw material shortages and long order lead times, not all industry sectors have been impacted equally. And while late orders, sourcing issues and the need to quickly pivot to alternate suppliers have hit most industrial sectors at some point during the pandemic, a new Citi survey reveals how some have definitely been hit harder than others.
In “DISRUPTION, DIGITISATION, RESILIENCE: The future of Asia-Pacific supply chains,” the global bank states that all supply chain managers surveyed in North America and Europe are either conducting a complete overhaul of their supply chain strategies right now or at least making changes to them.
And, 48% of supply chain managers in North America say that their top strategy at this point is “diversifying their supply chains to source from a range of suppliers or to sell in a wider range of markets.” In Asia, just 24% of supply chain managers have made this a priority. In Europe, the number is 40%, according to Citi’s survey.
“These differences suggest there has been less panic among Asian supply chain managers and that North American and European firms could be taking a step back from long and very global supply chains to add more resilience through regionalization and diversification,” Citi observes in its report. “They also imply that the reshoring rhetoric we have seen in the past 18 months may not just be rhetoric.”
Managing Disruption
Of the industries covered in Citi’s survey, automotive leads the pack—at least in Asia—for total number of supply chain disruptions since the pandemic emerged in March of 2020.
The bank says that 52% of automotive supply chain managers called COVID-related disruptions “very significant”—9% more than their counterparts in footwear, apparel and manufacturing, and much higher than managers from the healthcare, pharmaceutical and biotechnology sectors (13.3%) and among technology and electronics firms (6.7%).
The top reasons cited for supply chain disruptions in the automotive industry were:
- Production stoppages (48%)
- Trade restrictions such as export controls (24%)
- Access to raw materials or primary inputs (12%)
Access to raw materials/primary inputs was a key source of disruption in both the food and beverage and the healthcare/pharmaceuticals/biotechnology sectors, according to Citi. “In the food sector, access to raw materials shared the top spot with logistics,” it adds, “with both picked as the top reason for the supply chain disruption by 27.8%.”
For Some, it’s Almost Business as Usual
Looking at specific industry sectors, Citi says that the IT/ tech/electronics industry has the smallest share (16.7%) of companies conducting complete overhauls of their supply chain strategies right now. This compares with 48.3% in the automotive sector, 40% in footwear and apparel, and 33.3% in both the food and beverage and the healthcare and pharma sectors.
“The IT and electronics sector has seen less change in supply chain strategy than other sectors in the past 18 months,” Citi points out. “Forty percent of supply chain managers in the sector said they have not made or are not planning to make any material changes to their supply chain strategies (compared with the average of 22.9% and higher than in all other sectors).”
The automotive sector sits at the other end of the spectrum, with nearly half of its supply chain managers (48%) stating that they have either conducted or are conducting complete overhauls of their supply chain strategies (compared with just 3% who say they are not making any material changes).
Citi credits the well-publicized chip shortage—which resulted in some of the world’s largest automakers such as Fiat, Ford, Nissan and Toyota cutting production—with driving some of these shifts.
“Given demand for personal computers and other consumer electronics, the chip shortage is not likely to dissipate any time soon,” Citi states in its report, “and with increasing demand from the rapidly growing electric vehicle industry, auto manufacturers are compelled to consider an overhaul of their supply chains to keep up with production requirements.”
