SAP SE (NYSE: SAP) today announced new research revealing that supply chain transformation is an important business priority on CEOs agenda in Northern Europe. In almost two thirds of organisations this is an initiative sponsored at the highest level. Around 6 in 10 are planning a major supply chain transformation in the next 1-2 years and a similar proportion see customer expectations around sustainability as a critical factor for their operations. Technology is seen as a major driver to fight disruptions and over half of the companies are planning to invest in intelligent technologies for supply chain improvements.
Almost every business in the region admit their supply chain needs improving (93%), with 32% saying they need to make significant changes in order to meet the challenges in the year(s) ahead. This is particularly acute for businesses in the Netherlands, where 97% agreed improvement is needed – followed by 87% in France and 84% in Belgium.
The findings from the “Tomorrow’s Supply Chain: Disruption Around Every Corner” report highlights that since the start of the pandemic, supply chain issues have been disastrous for businesses. One in two businesses have been held back by delays in production of goods/delivery of services, rising to almost three quarters (71%) in the healthcare sector, and a lack of raw materials (34%). The knock-on impact of these has been significant – with a third reporting these issues have led to a decrease in revenues (33%), 31% saying they have been unable to pay employees (31%) or make rental payments (41%); as well as a loss of customers (35%) and damage to their reputation (27%).
Given this outlook, it perhaps comes as little to no surprise that they’re pessimistic about when the issues will be resolved. Over half (52%) of businesses believe that their current supply chain issues will continue until the end of 2023, with only 1 in 10 predicting that these will be resolved by the end of the summer. Almost a quarter (21%) of businesses believe disruptions will continue until the situation in Ukraine is resolved.
This knock-on impact of this will be felt by consumers. With ever-increasing record inflation figures for many businesses, increasing the price of their products/services isn’t an option to cover increases in supply chain costs. Instead, staff will bear the brunt of any cost rise, as 63% plan wage/recruitment freezes and 51% plan job cuts, only further exacerbating the challenge of recruiting and retaining staff who may be forced to look at alternative job options.
Business in Europe looking to local and global options
While 61% of European businesses say they think that deglobalization in Europe’s supply chains would help economic growth – the feelings are not shared across Europe. Two thirds (66%) of business leaders in France support this statement – rising to 100% in Belgium, but it has significantly less appetite in The Netherlands (34%).
And while nearly two-thirds are prioritizing home-based supply chains, 100% near-shoring remains unrealistic in today’s intertwined global world, hence companies need to find the right balance between global and local.
To make this happen, businesses across Europe are calling on the government too for more guidance and support to overcome the supply chain crisis. Half of business leaders (50%) want governments to offer incentives to attract and up-skill people to available jobs and over a third (37%) want increased collaboration with industry – rising to 50% in France. Forty-two percent think the government should monitor Europe’s supply chain itself and invest where necessary (increasing to 51% in The Netherlands), while 38% would like increased industrial policy and trade policy that is targeted at overcoming supply challenges.
“Business leaders and Executives are confronted with disruption being the new norm. The ability to respond to any given disruption within a finely tuned supply chain represents a competitive differentiator in the battle for growth, consumer trust and market share”, comments Sascha Kunze, Head of Digital Supply Chain and Industry 4.0, Northern Europe at SAP. “Seamless information & data flow across the supply and value chain from product design to planning and handover to manufacturing are crucial. Businesses that invest into Supply Chain “fitness” will be able to navigate the next chapter of growth”
To overcome potential supply chain crises in 2023, more than 8 in 10 businesses see a need to move on from a ‘just in time’ supply chain model to a ‘just in case’ model. This figure increases to 9 in 10 in France and Belgium.
Elsewhere, findings from the study show that European businesses are exploring various other avenues to improve their supply chains:
- 65% plan to prioritize in country-based supply chain solutions
- 67% plan to adopt new technology to help overcome challenges in the next 1-2 years
- 67% plan to find new environmentally friendly supply chain solutions
“Before the COVID-19 pandemic, the supply chain was taken for granted. It was an intangible part of business operations that just ‘worked.’ In fact, logistics as a topic of conversation rarely made headlines and bulletins, certainly less so the dinner table, business meetings and on social media”, concludes Kunze.” With the spotlight firmly fixed on the supply chain, and as this research identifies, businesses across Northern Europe are having to re-think their supply chain policies to build additional resilience to withstand being affected by more acute issues than ever before.”
Customer quotes
Dieter Verlaeckt IT Director at Bru Textiles “Of course, we also felt the effects of the crisis. Transport was really under pressure, but thanks to our investments in software, we can control, manage and automate our costs and business processes well. That really makes a difference. The study shows that 1 company in 4 does not know how and where to start with sustainability. With us, it was actually the other way around. We rolled out software, based on sustainability considerations. Soon we saw how improving the flow of information in our supply chain also opened up numerous opportunities to better plan our inventory and, as a result, provide better customer service. By collecting and enriching data, we have a complete overview of our supply chain.”
Olivier Kessler-Gay, Managing Director for Western Europe at Pandora: “Our challenge today is to meet the new expectations of a transparent, personalized and omnichannel shopping experience. By fully integrating our value chain, from the design of our jewelry and its manufacture in our workshops, to the supply of our stores, we have eliminated some of the problems faced by other market players. We can thus better anticipate the impact of macroeconomic developments and manage risks. While many uncertainties remain complex to grasp, the knowledge of our customers, the data and the tools at our disposal allow us to improve growth through a much more sophisticated approach and a finer understanding of demand.”