Shorter supply chains: US companies set sights on the Americas

Few things are as important to the success of a business as its supply chain.

In the search for the right balance of efficiencies and effectiveness, more U.S.-based companies are looking closer to home for answers.

In a recent KPMG survey of 250 senior executives, 59% reported that their companies currently have supply chains based in the Americas, and the executives indicated that in-process company initiatives are set to boost that figure to 69%.

The survey respondents forecasted that, in three years’ time, their companies’ trade routes outside of the Americas will shrink from 25% to 18%.

“Many companies have started to see the issues with offshore models that create long intercontinental supply chains,” Roberto Durán-Fernández, research professor at Tecnológico de Monterrey, said in the report. “And they are figuring out that shorter supply chains are a way to build resilience against geopolitical, environmental, and sanitary shocks.”

Cost will always be among supply chain considerations, but those surveyed ranked it seventh (22%) on a list of main reasons for supply chain relocation to the Americas. The top reasons cited (both at 31%) were “greater agility/resilience” and “faster time to market.”

While 78% of respondents — executives who work for companies that have moved some supply chain operations to the Americas or plan to do so — expressed satisfaction with their companies’ logistics, most are not sitting idly by.

The report, based on feedback from the executives, suggests that companies:

• Continually challenge and reassess the factors and assumptions driving their supply chain decisions. Two-thirds of respondents said political and economic uncertainty has prompted them to reevaluate their supply chain assumptions, and 61% said a volatile global trade environment has led to a focus on regional and domestic sourcing and distribution.

• Harness the power of data and analytics to gain an accurate picture of supply and demand and the variables that create risk. Among the survey group working at companies with the highest supply chain performance, 63% said data and analytics capabilities have become the most important factor in boosting their sourcing strategies.

• Consider tax planning at the outset of supply chain decisions. Sixty-four percent said that they consider indirect taxes, government grants and incentives, and transfer pricing rules during supply chain planning.

• Forge strong relationships with partners, suppliers, and wider stakeholders. Early support can be crucial in identifying and mitigating vulnerabilities. Local insights are invaluable.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.