European companies 'reshore' to become resilient to global disruptions

According to a new report, regional sourcing and production are important to becoming less vulnerable to disruption, leading to more than half of UK companies looking to ‘re-shore’ their supply chain by 2026. The trend comes in response to disruptions leading to more than $1 trillion in missed opportunities for the global economy in the last two years.

With the impacts of climate change becoming more pronounced by the year, the shockwaves of the pandemic and war still reverberating through the international community, and hostilities between the superpowers of China and the US ramping up, disruptive events have surged in recent years. According to new research from Accenture, this is resulting in huge shifts in how companies source their goods and services.

The researchers assert that in 2021 and 2022, companies missed out on £1.35 trillion in additional annual revenues. These losses resulted from their engineering, supply, production or operations being disrupted. The largest losses resulted from the disruption of industrial equipment, coming to a bill of $433 billion, followed by high-tech – at $269 billion.

With disruption in these areas in particular looking set to continue, amid heightened geopolitical disruption in the coming years, leading firms are taking action now. Accenture asserts that the most resilient companies are currently investing in a mix of resiliency-focused capabilities, which are enhancing their results as a result.

Generally, Accenture finds that all industries have a net resilience maturity of 56% – suggesting they are underway with ongoing transformations to that end. However, leading firms have a maturity score of 79%, suggesting they are already on the way to transforming their ways of working. Leading industries in terms of resiliency maturity further on this path are understandably those hit hardest by the disruption of the last four years.

Aerospace and defence – which have national security demands to factor into their performance – are already more advanced, with an average resilience of 63%. Meanwhile, the outliers of the life-science sector are the furthest ahead of anyone – with the top 25% of the industry recording resilience maturity of 87%, suggesting they are highly developed as they transform ways of working, in the wake of the pandemic. But according to Accenture, other sectors should use the best practices provided by these examples to hasten their resilience efforts, as key disruptions for them could be just around the corner.

Stephane Crosnier, global supply chain resiliency lead for Accenture, commented, “Organisations from every corner of the globe have had to deal with a seemingly relentless stream of ‘once in a lifetime’ disruptive events over the past few years. This forced companies to quickly apply a patchwork of short-term fixes to their complex global production and supply networks – which kept the lights on but hasn’t positioned them well for long-term growth in most cases. Now is the time to strategically redesign them for multi-sourcing, without creating unwieldy silos or new bottlenecks, and make them more transparent and agile with data and AI to drive sustained resiliency. Identifying key vulnerabilities in companies’ current operations and extended supply chain through improved visibility and simulation is key.”

One of the leading ways firms are looking to improve their resilience is through near-shoring or re-shoring their supply chains. Across Europe this is a key trend, with Germany and Italy for example, just over half of organisations – 54% and 53% respectively – also intend to buy most key items from regional suppliers by 2026. French producers have even higher ambitions, with 91% planning to produce and sell most of their products in the same region by 2026, over doubling from 44% today.

British seem to be lagging behind by comparison. By 2026, just over 53% of UK companies intend to buy most key items from regional suppliers. While this is up from only 24% today, this may leave the island nation – which is even more vulnerable to supply chain disruption after Brexit – at a disadvantage, compared to its continental rivals.