Despite the pandemic, Swedish entrepreneurs are continuing to rely on global value and supply chains. However, many believe that increased stockpiling and a wider network of suppliers have become more important in reducing exposure to risk in the future. This is according to a new report from the Confederation of Swedish Enterprise.
When the pandemic hit value and supply chains around the world, there were fears raised that certain aspects of global trade would diminish in favour of more local production. But in Sweden, interest in international trade remains strong. This is shown by the Confederation of Swedish Enterprise's business survey, which focused on how companies have managed their supply chains during the global crisis.
One of the questions asked is whether companies have made, or plan to make, changes to reduce the risk of future supplier disruptions. Of those Swedish companies that are importers - and thus have suppliers outside Sweden - 40 per cent responded that they have already made, or plan to make, changes to reduce the risk of supplier disruption. In addition, 50% of the companies said that they have not made, and do not plan to make, any changes. A further 10% answered "don't know".
– This is a sign that, after more than a year of pandemic, companies have identified certain changes that they either have implemented or plan to implement in order to reduce their exposure to risk in the future, says Anna Stellinger, Head of International and EU Affairs at the Confederation of Swedish Enterprise.
– They are planning greater stockpiles to reduce vulnerability, she added.
By far the most important change companies mention is increasing stockpiles. Almost eight out of ten Swedish companies that are implementing, or planning to implement, changes in their supply chains cite increased inventory.
– This does not significantly change trading patterns, but it does make the company less vulnerable than in a ‘just-in-time’ model, which is based on holding as little stock as possible. The value and supply chains, on the other hand, remain the same, the production is not brought back to Sweden, but larger stocks are secured to reduce vulnerability, says Stellinger.
Another key change that many companies have mentioned is increasing the number of suppliers they source from. More than half of the respondents - 53% - intend to buy inputs from more companies. Furthermore, almost one-fifth intend to buy from more countries. With new and broader trading opportunities, companies can spread their risks in the event of a future crisis, believes Stellinger.
– After the pandemic, companies have realised that they cannot put all their eggs in one basket. This is not a sign of deglobalisation, or so-called re-shoring, but is rather a way to diversify and thus reduce risk should a crisis strike in any region of the world, she says.
A relatively smaller proportion of companies mention re-shoring or buying more from Sweden (almost a fifth or 18% of those intending to make changes) and nearshoring (buying more from Europe, 15%) and lastly moving production and purchases to other countries outside Europe. Counting all companies, including those not intending to act, the figure for buying more from Sweden is only 7%.
Anna Stellinger draws several conclusions from the report findings.
– The first is that companies have acted pragmatically after everything that has happened in the past year. The second is that they have developed different strategies to reduce their exposure to a risk of supply disruption both now and in the future. The third is that these strategies are based on the fact that international trade and global value and supply chains remain a very important prerequisite. Moreover, it does not require political direction; this is something that companies do instinctively, based on their own circumstances, business opportunities, and the vulnerabilities of their respective sectors.