CFOs bemoan supply chain disruption
Supply chain disruption has caused a notable rise in costs and further negative impacts are expected during the rest of the year, according to a survey of mainly US-based CFOs by Deloitte.
In the quarterly poll of finance chiefs, 44 percent say supply chain issues have increased costs by 5 percent or more this year, while 32 percent expect a reduction in sales for the remainder of 2021.
But the shortages and delays caused by the Covid-19 pandemic have not affected all companies negatively, finds the research. Thirty-two percent of respondents say they have not experienced a substantial impact on costs and 29 percent say future sales and revenues should not be impacted.
The survey polled the views of 96 CFOs, with 85 percent based in the US and the remainder split between Canada and Mexico. Responses were collected between August 2 and August 14.
Global supply chains have struggled to reopen following their unprecedented shutdown during the Covid-19 pandemic, with companies facing major challenges moving raw materials and products between markets.
Businesses have reported difficulty booking shipping containers, sky-high transport costs, disruption at ports, a lack of truck drivers and long delays in receiving manufacturing components, among other issues.
Prior to the pandemic, supply chains were already under pressure due to the trade war between the US and China. The tit-for-tat imposition of tariffs between the two nations left companies with higher costs and searching for ways to diversify their network of suppliers.
The Deloitte survey also asked CFOs about the biggest risks to their supply networks. The top concern is cyber-risk (selected by 69 percent of respondents), followed by operational risk (60 percent) and geopolitical risk (56 percent).
‘Other types of supply chain risk – notably environmental, financial and legal – while of concern, are ranked lower,’ notes the report. ‘Other types of risk CFOs mention are semiconductor availability, capacity and logistics risks, access to a diverse and inclusive supplier base and labor regulations.’
In response to the disruption, a majority of finance chiefs say they will diversify their supply chains and some will also target more vertical integration, according to the survey.
Sixty-nine percent say they will diversify their sources over the next three years, compared with 29 percent who do not plan major changes, reports Deloitte. Around a quarter (23 percent) of respondents say they will become more vertically integrated over the same time period.
Looking at supplier locations, 39 percent of CFOs plan to increase sourcing from North America over the next three years – a stat that will be influenced by the high proportion of respondents from that region – while 32 percent expect to decrease their sourcing from China.