Have you experienced supply chain disruptions during the pandemic? Material shortages, shipping delays, and soaring costs have forced manufacturing companies to reevaluate their global supply chain strategies. Over the past year, the manufacturing sector has undergone an unprecedented stress test that exposed vulnerabilities in traditional supply chains while accelerating the urgency for transformation.
BDO's 2021 Manufacturing CFO Outlook Survey reveals how mid-market U.S. manufacturers are actively seeking pathways to reshape their supply chains. This report serves as a strategic blueprint, clearly outlining future directions for supply chain evolution in manufacturing. It provides not only data-driven insights but also in-depth analysis of corporate strategies and future planning.
Developing Plan B: Backup Suppliers Take Priority
The survey shows that 50% of mid-market manufacturers plan to identify alternative or backup suppliers this year to address pandemic-induced uncertainties. This reflects growing awareness about the fragility of single-source supply chains. Diversified supplier networks can effectively mitigate risks and ensure production continuity.
During the pandemic's initial outbreak, many companies suffered significant losses due to over-reliance on single suppliers. When primary suppliers halted operations, entire production lines followed suit. Establishing backup suppliers has become essential for risk management and operational resilience.
Selecting appropriate backup suppliers requires careful consideration of qualifications, production capacity, geographic location, and pricing. Companies must also cultivate strong relationships with secondary suppliers to ensure timely support when needed. A diversified supplier network not only reduces risk but also enhances bargaining power.
Geographic Shifts: Europe Gains Favor as China's Appeal Declines
Beyond backup suppliers, supply chain geography is undergoing transformation. Nearly a quarter (24%) of surveyed companies plan to relocate portions of their supply chain in 2021, with Europe emerging as the most stable long-term sourcing destination outside the U.S. Only 10% of respondents consider China a stable long-term sourcing location.
This trend suggests that geopolitical risks, trade tensions, and supply chain security concerns are influencing corporate decisions. While China previously attracted manufacturers with low labor costs and robust industrial infrastructure, rising wages, geopolitical uncertainties, and trade conflicts have prompted reevaluation.
Europe's established manufacturing base, skilled workforce, and political stability make it an attractive alternative. European governments have implemented policies encouraging production repatriation. However, supply chain relocation involves complex considerations including costs, timelines, and coordination with stakeholders.
Reshoring U.S. Manufacturing: The Homecoming Trend
Notably, 22% of mid-market manufacturers plan to bring supply chains back to the U.S. This reshoring trend relates to geopolitical tensions, tariff barriers, and rising labor costs abroad. Domestic production shortens supply chains, reduces transportation expenses, improves quality control, and creates jobs.
The U.S. government has actively promoted reshoring through tax incentives and subsidies. However, challenges include higher domestic labor costs, stringent environmental regulations, and infrastructure limitations. Companies must carefully evaluate costs versus benefits before committing to reshoring.
Lessons From 2020: Agility and Resilience
Manufacturers demonstrated remarkable adaptability during 2020's challenges through several key strategies:
- Maintaining supplier relationships: Strong partnerships ensured priority access during shortages.
- Rapid sourcing diversification: Companies expanded procurement channels to avoid single-source dependency.
- Digital adoption: Remote work technologies and e-commerce platforms maintained business continuity.
Digital Transformation: The Supply Chain Upgrade
Digitalization is critical for building resilient supply chains. According to the Institute for Supply Management, 65% of U.S. manufacturers are reassessing data analytics usage to stabilize operations. Digital technologies provide end-to-end visibility, enabling proactive issue identification and resolution.
Over half (52%) of BDO survey respondents plan supply chain technology investments this year to enhance efficiency, visibility, flexibility, and responsiveness. Digital transformation offers multiple benefits:
- Automated processes reduce manual intervention
- Real-time inventory tracking improves visibility
- Enhanced market responsiveness
- Improved supplier collaboration
Balancing Investment Returns
Despite digital transformation benefits, companies must evaluate investments carefully. Economic uncertainty and debt obligations constrain some manufacturers' ability to upgrade technology rapidly. Without cost recovery through product pricing, return on investment becomes challenging.
BDO's National Manufacturing Practice Leader Eskander Yavar notes that tariffs and high transportation costs are prompting procurement strategy reevaluations. Regarding reshoring, companies may await policy clarity before committing to supply chain changes. Many manufacturers remain cautious about large-scale transformations during ongoing uncertainty.
Global Footprint Optimization
When evaluating alternative suppliers or reshoring options, the BDO report recommends comprehensive analysis of global network footprints, including trade and tax implications. Understanding international trade rules, tax policies, and compliance requirements is essential for informed decision-making.
Companies need robust global supply chain management systems with real-time monitoring capabilities. Strengthening communication with overseas partners ensures supply chain stability and security.
Conclusion: Building Supply Chains for the New Normal
The pandemic has accelerated supply chain transformation across manufacturing. Backup suppliers, geographic realignment, and digital adoption are helping companies build more resilient and competitive networks. However, successful transformation requires balancing short-term needs with long-term strategy.
Future market leadership will belong to companies that successfully reengineer their supply chains. While pandemic challenges are unprecedented, they present opportunities to rebuild stronger, more agile supply networks capable of thriving in the new normal.
Emerging Trends in Post-Pandemic Supply Chains
Beyond immediate responses, several long-term trends are emerging in manufacturing supply chains:
Regionalization: Companies are establishing production and supplier networks closer to end markets to reduce transportation distances and geopolitical risks.
Sustainability: Environmental and social responsibility pressures are driving demand for greener, more ethical supply chains.
Supply Chain Finance: Innovative financing solutions are helping small and medium suppliers maintain liquidity.
Artificial Intelligence: AI applications in demand forecasting, inventory optimization, and logistics planning are growing.
Cybersecurity: Digital supply chains require enhanced protection against data breaches and network threats.
To prepare for these trends, manufacturers should develop clear supply chain strategies, strengthen risk management, embrace digital tools, foster collaboration, and commit to continuous innovation. BDO's report provides valuable framework for navigating this transformation.