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Tough Supply Chain Decisions for Future Fitness

Finding a balance on competing objectives is essential as inflation and geopolitics continue to disrupt global supply chains.

Global supply chains are still under severe strain following the pandemic but they now have the added challenges of geopolitical events leading to sanctions and spiralling energy costs.

Today’s supply chain priorities

UK businesses wisely aim to diversify their supply chains to build resilience for the future. In our FutureFit survey of 500 business decision-makers in a wide range of sectors, nearly two thirds (62%) say they believe a diverse supply chain is a way to make their business more resilient.

60% of business decision-makers surveyed are making more effort to use a mix of suppliers than they have in the past.

The problem is leaders have competing supply chain priorities:

  • Over three quarters (78%) say sourcing ‘reliable and trustworthy suppliers’ is important while choosing suppliers, but;
  • Almost as many (75%) say ‘choosing the lowest cost provider’ is just as important.
  • More than half look for carbon reductions when selecting suppliers. At the same time, many hope to continue to buy from far-off suppliers.
  • Only 42% think the days of using the cheapest supplier many miles away are over.

Are supply chain shortages a thing of the past?

From computer chips to wood, the disruption to supply chains caused by the pandemic triggered shortages in all manner of internationally traded goods.

Businesses are optimistic that such shortages won’t be as prevalent in future. Fewer than half list them in their top three challenges in the short, medium and long term (see below chart).

But that does not mean their supply chain headaches are over: respondents expect rising inflation and geopolitical events, including sanctions, to be their biggest challenges from next year onwards. These could be as disruptive as the pandemic. Soaring inflation could upturn the affordability of suppliers from certain markets. Sanctions, which the international community has deployed against Russia in response to its invasion of Ukraine, could become more widespread, potentially reshaping global trade routes.

 

What do you see as the main challenges currently facing your business over the following timeframes
(% respondents who ranked each challenge in their top three)

How might the current outlook impact export and import?

It’s not just supply chains that will feel the impact of the current circumstance: 60% of respondents aim to diversify the markets they sell to, but these too will be shaped by inflation and events on the global stage.

As they prepare for the future, business decision-makers will need to become adept at assessing the exposure of certain markets to price rises and geopolitical disruption.

Next steps for supply chain resilience in 2023 and beyond

  • Competing objectives can’t all be met by any single supplier so review your mix. Thoroughly map your supply chain against your priorities to identify the gaps.
  • Enhance supply chain transparency. Consider further investment in the right digital solutions to enable better visibility; from digital onboarding to application programming interfaces (APIs) for data transmission from your suppliers.
  • Identify needs for changes in stock management. With just-in-time delivery approaches potentially vulnerable, consider if you need to hold more inventory and review delivery times.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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