Companies worldwide are ramping up regional suppliers and production facilities to become less vulnerable to disruption, according to research from consulting firm Accenture.
By 2026, 65% of companies intend to buy most key items from regional suppliers, up from 38% today. And even more organizations (85%) plan to produce and sell most of their products in the same region by 2026, almost doubling from 43% today, Accenture said in its “Resiliency in the making” research.
Those firms are spending big to get there: on average, companies are investing $1 billion in 2023 to digitize, automate and relocate supply and production facilities, which is expected to increase to at least $2.5 billion in 2026, according to the report.
That’s because disruptive events have surged in recent years, from geopolitical shifts and extreme weather to technology breakthroughs and material and talent shortages. Few businesses sustained their resilience and long-term growth amid the turbulence. In 2021 and 2022, companies missed out on $1.6 trillion in additional annual revenues because their engineering, supply, production or operations were disrupted. At the same time, the 25% most resilient companies achieved 3.6% higher annual revenues than the 25% most vulnerable companies.
The study is based on a survey conducted January – March 2023 among 1,230 senior executives across engineering, production, supply chain and operations. Respondents were from Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Spain, Sweden, the United Kingdom and the United States. Their businesses were from the following industries: aerospace and defense, automotive (OEMs), automotive (ancillary, parts), chemicals, consumer goods and services, high-tech, industrial equipment, metal and mining, life sciences, oil and gas (upstream and downstream), and utilities.
According to the report, regional sourcing and production are important to becoming less vulnerable to disruption, but not enough to reach sustained resiliency. To reach that goal, companies must also increase their digital maturity by investing in data, AI and solutions like digital twins. Having more mature capabilities in these areas helps companies build reconfigurable supply chains and autonomous production, also enabling dynamic, sustainable product development and supporting decentralized, real-time decision-making at the frontlines of operations.
“When disruption struck, many companies quickly applied short-term fixes to their complex global production and supply networks. These networks had been designed for cost efficiency and just-in-time deliveries. Now is the time to strategically redesign them for multi-sourcing, without creating unwieldy silos or new bottlenecks, and make them more transparent and agile with data and AI to drive sustained resiliency,” Sunita Suryanarayan, global supply chain and operations resiliency lead at Accenture, said in a release.
