What is the new normal?
Business leaders, sustainability and procurement managers, this is what McKinsey believes you should now be considering with respect to your supplier networks in an article released today:
- The prospect of more border restrictions is leading to greater preference for local over global products and services.
- The need for resilience across supply chains is driving a move towards bring sourcing closer to end markets.
- A transformation in how supply chains operate, with companies finding themselves vulnerable because they cannot get the parts they need. Companies will need to build backup and safety plans.
- Supply chains built on just-in-time inventory and distributed component sourcing may have to be reconsidered.
- The pressure to include environmental, social and governance factors in valuing a business is likely to expand to incorporate resilience to outside shocks, such as pandemics.
- With many businesses likely to be operating to some extent with government money, scrutiny will be intense and could show itself in the form or regulation, particularly with regard to domestic sourcing and workforce safety.
Even before the coronavirus, the idea of the ‘triple bottom line’ – profit, people and the planet had become mainstream, including socially responsible investment funds. In August 2019, over 180 CEOs in the United States signed a statement committing themselves to priorities other than just shareholder value, including investing in employees, supporting communities and dealing ethically with suppliers. With government backing now entering the tens of trillions of dollars globally, in the aftermath of this pandemic governments will expect businesses to find long-term solutions to social fractures heightened by the crisis.
"Supply chains built on just-in-time inventory and distributed component sourcing may well have to be reconsidered, given the way many have been disrupted. Instead, companies will want to build backup and safety plans." - McKinsey
As the situation unfolds, McKinsey argue that the global crisis is calling for an “imminent restricting of the global economic order”. And there is an opportunity here: well positioned, resilient and responsible businesses stand to benefit from a burst of innovation and productivity as the world eventually reconnects.