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Gartner: CSCOs Must Incorporate Regional Designs into Global Networks

September 13, 2021

To better deal with growing protectionism and the need for higher agility, chief supply chain officers (CSCOs) must incorporate regional designs into their global networks without diluting the cost or competitive advantages of existing global networks, according to Gartner.

Gartner analysts pointed out today during the Gartner Supply Chain Symposium/Xpo, which is taking place virtually in EMEA through Wednesday, that global trade has tripled in the 21st century, from $7 trillion to $21 trillion – along with the complexity of global supply chain networks.

“Many industries have become capacity-constrained,” said
Kamala Raman, vice president analyst with the Gartner Supply Chain practice. “Some of this is driven by availability of material, some is driven by labor shortages in both manufacturing and transportation, some of it is driven by changing quarantine conditions around the globe, as well as the general inability of countries around the world to operate at a pre-pandemic normal.”

For supply chain leaders, this means that the world is still relying on global trade but has become less globalized compared to a few years ago. A recent Gartner survey showed that 51% of supply chain leaders expect that national interests and pressure to favor domestic operations will increase in influence on future supply chain decisions. A successful supply chain now integrates regional supply chains into global networks.

There are two approaches supply chain leaders should consider:

Regional Sourcing Improves Scale-Based Industries

For scale-based industries that are driven by customer demand, such as clothing, electronic devices and groceries, it has been the consumer’s need for predictable supplies, despite volatile demand patterns, that has led to a rise in local sourcing for retailers. Consumers demand agility and reliability from their retailer of choice. If a product is not available, and consumers don’t know when it will be in stock again, they will go to the competition.

“Consumers want reliable goods available at an acceptable price. In today’s world, a company’s ability to fulfill demand does not come from only a global network, or only a regional network, but a blend of both,” Raman said.

Xi Chen, VP, Operations with Geekplus America added, “It’s no secret that the global pandemic has greatly changed consumer behavior and forced many retailers and e-commerce companies to adapt to sharp changes in demand. Our autonomous mobile robots (AMRs) and advanced software solutions help companies meet these unprecedented consumer expectations by providing flexibility and efficiency in the warehouse, as well as the regional and global supply chains. This enables our customers with faster and more accurate order fulfillment capabilities which ultimately enhances brand loyalty and consumer satisfaction.”

Partnerships Help Navigate Strategic Industries

In strategic industries, such as the semiconductor or high-capacity battery sector, organizations can’t make decisions based on cost alone. They are also restricted by national security concerns or simply an impossibly high demand for innovation. Public-private partnership is often key.

For example, the European Commission has approved a $3.5 billion fund to foster the development of batteries for electrical vehicles in 12 European countries. This public funding is expected to draw a further $11billion from the private sector. Taiwanese entrepreneurs have drawn upon their government’s substantial R&D support to become a chipmaking powerhouse. The CHIPS for America Act will provide $52 billion in federal investments to strengthen domestic semiconductor research, design and manufacturing.

Supply chain leaders in strategic industries must distinguish between the decisions they control, the decisions they can influence, and the decisions made for them by industrial or national policies. Meaningful partnerships with relevant players in their ecosystem, as well as governments, are critical for success.

“Countries are all tightly integrated when it comes to the goods we’re used to having around. Consider the dozens of suppliers around the globe in the COVID-19 vaccine supply chains that are saving billions of lives today. For example, for the Pfizer/BioNTech vaccine, there are 280 components from 25 different suppliers involved, spanning 19 countries. CSCOs have to find a way to balance the global supply chains that have worked well– and still do – with regional additions that place people, planet and purpose above short-term profits,” Raman concluded.

Bob Bova, President and CEO of AccuSpeechMobile commented, "Gartner rightly states that any supply chain technology strategy, globally and regionally, needs to be agile, flexible, and adaptive to changes. While many benefits can be adopted using cloud based applications, Edge-based architecture solutions can be customized quickly and easily to provide the type of functional agility Gartner cites. Device-based software implementations will empower cloud applications for many years to come, specifically because of agile change management."

"Designing the right supply chain network right now is a real challenge, for all the reasons cited by Gartner, putting a premium on a network strategy that focuses on agility," said Dan Gilmore, chief marketing officer at supply chain software provider Softeon. Gilmore added that "This puts a premium as well on selecting supply chain software that provides high levels of configurability, and that is delivered from a software partner that has a proven track record of supporting on-going change and continuous improvement."

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