Buck Consultants International believe that developing and implementing a successful supply chain strategy requires an end-to-end value chain vision.
Based on decades of data and thousands of data points, and an award-winning record of accomplishment, the framework revolves around five pillars that link to the operations of multinational companies.
The first point in the framework is ‘De-coupling’ from ‘risky’ markets. Buck: “Over the past years, increasing trade tensions have led companies to decrease their exposure to certain regions – including China. Although those regions remain important markets, their competitiveness as a global production hub has been decreasing due to rising costs of labor and a more difficult regulatory environment.”
The second dimension is ‘De-single sourcing’. This relates to the recent global economic disruption that has exposed the vulnerability of the world’s supply chains, especially with the advent of the just-in-time manufacturing model.
There was a point during 2020 when the operations of more than 90% of automotive manufacturing plants in Europe were affected due to lockdowns. To address this, many companies are now looking to multi-sourcing models.
Thirdly, the framework advocates the need to ‘de-risk supply chains. “Companies will look to de-risk their supply chains through more intensive inventory planning. This includes increasing the amount of inventory held, necessitating the need for more warehouse space. While this reduces risk, it also represents significant costs, such as having to set up new production and distribution operations or expand or consolidate. Other methods include demand forecasting by AI.”
The fourth point in the ‘De-5’ framework relates to ‘De-centralizing production’, which is sometimes known as reshoring, where production capacity is brought back to the market of origin, such as the United States or Europe.
The fifth pillar of the framework is ‘De-carbonization’. “Businesses are looking to reduce carbon emissions due to international regulations and changing client expectations. This dovetails with decentralization of production, as not having to ship products across long distances reduces carbon emissions.”