The past two years have been a turbulent time for American manufacturing. Now, with concerns over a recession looming, a new survey seems to indicate a major shift could already be taking place.
SAP, a German-based software giant and the global leader in supply chain software with approximately 23% market share, surveyed 400 American companies about how long they expected the current supply chain issues to last. Nearly 50% said until the end of 2022, while around 30% said the summer of 2023. The remaining companies said they expected constraints to last until the end of 2023.
SAP also asked these companies about the current state of their supply chains. 49% said they needed a lot of improvement, while 39% said in need of some improvement. All companies polled agreed that their supply chains had room to improve.
Many U.S. companies are now shifting from a “just in time” supply chain model to a “just in case” model, which involves carrying more inventory and often using suppliers closer to the United States as opposed to relying on Chinese manufacturing. This shift is expected to increase costs while U.S. consumers are also dealing with historic inflation.
“The supply chain issues are costly and it isn’t all due to inflation,” said SAP board member Scott Russell. “The costs to be able to build that resilience are ultimately being borne by the consumer, who now needs to prioritize lower prices over quality.”
Rising costs in supply chain shifts are also impacting business decisions. 61% of survey respondents said wage and recruitment freezes would be their top move to combat continued rising supply chain costs.
To overcome these issues, more U.S. companies are turning to technology and simultaneously emphasizing the need for sustainability.