The Ongoing Challenges in Global Supply Chains: Insights from Treasurers

In a recent survey conducted by research consultant East & Partners, treasurers and CFOs from more than 750 large corporations across eight prominent economies expressed their concerns regarding the prolonged disruptions in global supply chains. The survey indicates that these disruptions are expected to impact businesses for an additional two years on average, with some stakeholders believing they will persist until at least 2025.

The study, titled “Digitising and Greening Global Supply Chains,” sheds light on the primary consequences of supply chain disruptions experienced by corporates, which include:

1. A direct negative impact on revenue (23% of respondents).
2. Increased supplier prices (19%).
3. Complex and challenging supply chain management (18%).
4. Delays in orders (16%).

This research involved direct interviews with large corporations in eight countries: Australia, Canada, China, Germany, Hong Kong, Singapore, the UK, and the US.

Martin Smith, Head of Markets Analysis at East & Partners, emphasizes that the study highlights the fact that these disruptions are anticipated to continue affecting corporates in the foreseeable future. He notes that the convergence of various factors, including geopolitical, macroeconomic, and pandemic-related issues, poses a significant challenge to global logistics players, shipping companies, and port operators. They must address the growing backlog while meeting the rapidly increasing demands of consumers and businesses in supply chain operations.

Interestingly, the survey found that the supply chain shock induced by the pandemic did not lead corporations worldwide to shift towards building comprehensive domestic supply chains. Even in countries like China and Australia, where more than half of the supply chains are located within their domestic borders, there is an expectation that the trend of offshoring will continue into 2023.

Smith suggests that the reasons behind such shifts in supplier geography are multifaceted and extend beyond addressing vulnerabilities exposed by the COVID-19 pandemic. He points to two primary driving factors: geopolitical concerns and escalating tariffs.

Given the increasing emphasis on environmental, social, and governance (ESG) considerations among corporations, many are turning to their banks for guidance on sustainable supply chain financing. However, the survey reveals that nearly one in three of the large corporations surveyed could not identify any bank as a leader in this field. Similarly, one in five corporations could not recall any bank or financial services provider as a standout leader in digital innovation, including areas such as cloud computing, the Internet of Things (IoT), artificial intelligence (AI), distributed ledger technology (DLT), automation, and other technology solutions.

Despite these challenges, there is a strong demand for digital solutions, with only 2% of firms stating that they are not currently implementing digitization projects within their supply chains. Notably, 72% of those surveyed have either implemented or plan to implement cloud computing, which is the dominant focus in digital technology investment, followed by IoT (24%) and blockchain/DLT (16%).

In terms of banks that are highly regarded by treasurers for both sustainability and digital innovation, the survey identifies a select group, including HSBC, Standard Chartered, Citi, and BNP Paribas. However, Smith points out that the competition in this area is so intense that no single provider stands out by significantly exceeding customer expectations in all circumstances.

Furthermore, the survey reveals that supply chain partners are increasingly requesting various digital functionalities from corporates. These include order tracking and tracing, ERP integration, risk management monitoring, and legacy system upgrades.