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Most companies are leaving themselves wide open to supply chain risks. Many are simply scanning for potential crises, i.e., doing nothing. Others are planning for potential disruption, but are taking no action to avoid risks. The capacity for supply chain resistance to disruption and recovery is of vital importance. Harry Moser, Founder of Reshoring Initiative, proposes a proactive approach. Take steps now to minimize the impact of disruptive events that could occur later. According to Oracle, only 6 percent of companies have total supply chain visibility while 69 percent don’t have any supply chain visibility at all. Risks that are hiding in plain sight often come from suppliers’ suppliers (59 percent). They can be from penalties for supplier violations (99 percent) or // by Harry Moser, founder and president, Reshoring Initiative // even unidentified modern slavery (U.S. imports $169.6 billion of atrisk products). Geopolitical developments can occur suddenly with only subtle foreshadowing and send ripple effects throughout a complex supply chain. Some of the top geopolitical risks in 2024 include the Red Sea crisis, Israel-Hamas war, RussiaUkraine war, Russia-NATO tensions, U.S. and global elections, U.S.-China tensions and critical mineral rights. Extreme conditions, including natural disasters and pandemics, require efficient, agile supply chains. Disaster planning should include the tools and skills to react to any of these unplanned situations. The efficiency of an operation determines the speed at which it is able to react to changing conditions. Reshoring and nearshoring supply chains make supply chains shorter; less complicated; and more efficient, resilient and agile.

The planning gap

A recent study identified an agile planning gap – a disconnect between Supply chain risks hiding in plain sight? intent and reality. Seventy six percent of supply chain professionals believe their companies are equipped to respond to disruption, but only 14 percent have the processes and technologies in place to minimize impact if the event occurs. Companies are leaving themselves at risk for the unexpected. Even though 43 percent of companies are discussing the increasing tensions over Taiwan, only 29 percent are actively scenario planning.
Prior to the pandemic, supply chains were mainly offshore, complex and designed for just-in-time fulfillment. These interconnected global supply chains were vulnerable to the “domino effect.” In this scenario, one disruption could send shockwaves across an entire region, causing shortages of key components, increased costs and extended delays as multiple companies scramble for the same resources to manage the disruption at the same time. For example, the 2021 Suez Canal blockage temporarily stopped 369 ships from passing through to the canal to the tune of $9.6 billion of trade per day. The supply chain effects continued to be felt for six to nine months after the blockage was resolved. Shorter, more flexible supply chains are, therefore, key to thwarting the domino effect. Companies are increasingly seeking the moderately higher cost of domestic components as insurance against extreme conditions and geopolitical disruption. Reshoring minimizes risk, improves production management, shortens delivery time and enhances overall supply chain control. Business leaders are investing in reshoring to withstand supply chain shocks and recover more quickly when they occur. Companies can use the Reshoring Initiative’s free online Total Cost of Ownership (TCO) Estimator and Geopolitical Risk (GPR) measure to compare alternative sources. GPR is the probability in a year of a U.S. buyer being decoupled for a long time, e.g., six months or more, from its source in that country. By using TCO, companies can better evaluate sourcing, identify alternatives and even make a case when selling against offshore competitors.

Author: Harry Moser