The Coronavirus crisis, and the unprecedented pressure that this has placed on business supply chains, has sparked debate on how best to avoid the risk of a collapse in the flow of goods and services. Whereas many are arguing in favour of reshoring production and having businesses move production ”back home”, others are saying that the opposite is a safer strategy. We now have a clearer idea what Swedish firms are planning.
We have conducted a survey among our member companies on how their supply chains have been affected by the crisis and what their actions, or planned actions, are to alleviate future risks to their supply chains. Some 1,753 firms of all sizes and from all sectors took part in the survey.
We found that a majority of firms had experienced problems during the crisis, the most common of which were extended delivery times (55%), followed by a lack of available goods/services (36%), goods/services becoming more expensive as a result of the crisis personnel (16%). and problems in moving personnel (also 16%). Some 28% of firms (22% of large firms) said they had encountered no problems.
On the persistence of the problems, only 7% of firms say they still face considerable great difficulties, 60% say they still have some difficulties while 27% say that the problems have now been resolved. The remaining problems seem to be greatest for consumer goods companies, where 74% of retailers and wholesalers are still experiencing problems.
When it comes to the actions that firms have taken or plan to take to decrease vulnerability in the future, the largest segment (39% of firms) plan to do nothing. However, for the manufacturing sector, only 33% plan to do nothing while for large firms, only 27% plan not to take proactive steps. Since so many large firms seem to be doing something, we must expect changes to the supply chains and how they operate.
What are the firms planning to do?
Among all firms, 27% say they will increase stockpiling, with this figure rising to 41% for large firms in the manufacturing sector. Many firms also plan to increase the number of foreign suppliers; this is particularly the case in the manufacturing sector.
When it comes to reshoring, 15% say they will increase their share of sourcing from Sweden (or the EU/EEA with 7% of firms). However, only 2% wish to relocate their production ”home” to Sweden. There are more large than small firms planning to increase sourcing closer to home, particularly to the EU/EEA. Of all firms, 6% – rising to 13% for large firms – plan to increase the number of countries they source from.
Commenting on the survey, Anna Stellinger, Deputy Director General and Head of EU and International Affairs, said:
“It is striking that only 2% of the close to 2000 responding companies say that they plan to bring production home. Our conclusion is that most firms prefer stockpiling and diversification as the most effective means of building resilient supply chains. When reading the responses, it is also clear that many are calling for open borders and free trade, and that very few wish to see mandated reshoring or policies that force firms to buy from local suppliers.”
“We see a great deal of discussion and opinion about companies’ value chains but relatively little discussion with companies about their value chains. After all, the best way to achieve resilience and to efficiently operate supply chains should primarily be a matter for the businesses, and we hope that policy makers continue to refrain from policies to mandate reshoring.”