For years, ever-expanding and more efficient supply chains were like magic oil lubricating the global economy.
They kept delivering cheaper goods, wider choice and higher economic growth. Until the pandemic hit, and many of the chains got stuck.
In 2023, many businesses are still recovering from that massive system shock. With the crisis in Ukraine and tensions in the China Sea adding new uncertainty, building more resilient supply chains has become a more difficult task.
To find out how businesses are faring in this changed landscape, we surveyed risk and supply chain leaders in eight key sectors.
How are they rebuilding? What are the main challenges and risks they face? And what will the supply chains of the future look like?
We found that most businesses suffered larger than expected supply chain losses during the crisis. As a result, a large majority are reviewing their supply chains and considering a range of solutions to reduce complexity and risk, and boost resilience.
However, businesses face huge obstacles, including continuing shortages of labor and raw materials, external geopolitical and weather risks and a lack of alternative suppliers.
For many, just getting full transparency of all the links and vulnerabilities in their supply chain is a difficult task.
But those who are tackling these issues and taking action to simplify and secure their systems are reaping a dividend through more robust supply chains that are likely to better withstand future shocks.
This report covers the survey’s main global findings. We will follow this with further industry-specific reports detailing the results in each sector in Spring 2023.
Losses higher than expected — but mainly short-term
Almost two thirds (65%) of business leaders said losses related to supply chain were higher or much higher than expected over the last two years as they continue to count the costs of the pandemic.
But a majority (58%) are more concerned about disruption causing short-term loss of sales rather than long-term losses (25%).
Businesses are taking action to increase resilience
65% have made improvements and a further 18% have completely transformed their supply chains in response to the pandemic. 58% plan to make significant changes in the next year.
Working collaboratively with suppliers is a key focus: 53% rated this among their greatest opportunities for improving supply chain management.
Poor data and transparency are roadblocks
73% agree or strongly agree that supplier concerns about proprietary knowledge or intellectual property make it difficult to get full transparency in their supply chain.
This may help to explain why more than three-quarters (77%) said they lacked the data and knowledge to understand their risks.
Only 12% said they had identified all the data they need to manage supply chain risks with robust processes to gather it.
Firms lack insurance solutions to manage risks
89% think insurance for supply chain risks is mission critical or that some cover is necessary. But almost as many (80%) said a lack of insurance solutions was among the greatest challenges to addressing their risks over the next 3-5 years.
This may reflect the lack of cover for pure economic losses resulting from shortages and delays in most property and marine cargo policies.
Business interruption and climate risks not well covered
Only 17% of respondents said they had specific insurance to cover business interruption risks in their supply chain, although 53% thought it was covered by other insurance.
Only 25% feel confident they have sufficient cover for the impact of extreme weather on their supply chain.
Economy and cyber among the top risk factors
Economic uncertainty (32%) and inflation (26%) are among the leading factors underlying supply chain risks.
Cyber risks are believed to have the deepest impact on supply chains rated by 34% as a high impact and 54% as medium.
Meanwhile continuing shortages of raw materials (39%), logistics and warehousing (35%) and components (33%) are all among the top supply chain factors that will impact businesses over the next two years.
Risks are within firms’ influence but not control
Fewer than half of companies (48%) feel the root causes of supply chain risks are within their control.
But 71% do have some influence over the quality of supply chain risk management, perhaps because of the work they’ve been doing to improve resilience.
To learn more, download your free survey report by completing the short form at the top of this page.
WTW offers insurance-related services through its appropriately licensed and authorised companies in each country in WTW operates. For further authorisation and regulatory details about our WTW legal entities, operating in your country, please refer to our WTW website. It is a regulatory requirement for us to consider our local licensing requirements.
