Report: Manufacturers prioritize a resilient, yet efficient, supply chain

Most companies have been focused on building resilient supply chains in the wake of the Covid-19 pandemic and other events that threatened to disrupt business operations over the past four years. But that may be changing, as supply chain pressures ease and cost concerns take on a larger role, especially among manufacturing organizations.

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That’s according to a recent global study from Deloitte that examines the factors causing companies to expand and enhance their supply chains. The May report, “Restructuring the Supply Base: Prioritizing a Resilient, Yet Efficient Supply Chain,” found that companies are trying to strike a better balance between performance and cost by reevaluating and restructuring their supply chains.

“For many industrial manufacturers, the response of the supply network to the Covid-19 pandemic, geopolitical challenges, and natural disasters thrust supply chain resilience into the limelight,” the report’s authors wrote. “But the pendulum appears to be swinging back, with costs and margin pressures once again at the forefront as companies reevaluate their supply chains.”

Among the report’s findings: 

• Supply chains are getting closer to home. Key approaches to restructuring supply chains include reshoring, nearshoring, and focusing on U.S. free trade partnerships. The report notes that Mexico has overtaken China as the lead U.S. trading partner, accounting for a 15.4% share last year compared to China’s 13.9% (which was down from more than 20% in 2018). What’s more, the number of companies relocating their manufacturing operations and supplier base—either to their home markets or nearby—doubled in 2022 compared to 2021.
• Policy is taking center stage. Industrial policy is of growing importance, as the investment in U.S. plants and other production facilities increased by more than 63% in 2023 from 2022, according to the report. This represented the highest year-over-year increase in the last eight decades.
• Strategies are getting broader. Companies are now employing differentiated strategies to realize value in their supply chains following years of focusing on reducing supply-chain driven production delays, according to Deloitte. Strategies include dual sourcing, mergers and acquisitions, enhanced partnerships and supplier agreements, and expanded internal capabilities, all aimed at managing risk and cost.

Looking ahead, the authors pointed to a growing focus on the need to maximize resilience while maintaining margins.

“The restructuring of the industrial manufacturing supply base reflects the sector’s resilience and adaptability, particularly in the face of external uncertainties,” the authors wrote. “Companies across the sector are continuously seeking opportunities to maximize resilience while keeping margins high. They are finding motivations for restructuring through delivery performance, cost reductions, and government incentives, all aimed at profitable growth.”