By Fraser Paget is Head of Supply Chain & Logistics Advisory Services at BDO LLP
THE pressure on supply chains has been pronounced for some time, as importers and exporters contend with an array of challenges that are impacting the movement of products across the globe.
Three years on, Brexit is still a significant factor. This has been compounded by the global pandemic, Russia’s invasion of Ukraine, and, more recently, poor weather impacting food supply. These challenges add a layer of complexity that is stifling some businesses in Scotland.
Supply chain issues have been a regular talking point in Scotland, as part of our bi-monthly Rethinking the Economy survey of 500 mid-market businesses, with many businesses citing the supply chain as their greatest challenge, and number one priority. The latest findings are no different, with supply chain featuring strongly in the list of the biggest challenges facing Scottish businesses over the next six months.
In fact, more than a quarter of companies (28%) view supply chain disruption, such as delayed materials, cost increases and shortages, as the biggest challenge over the next few months. There’s no escaping the fact that domestic and global supply chain issues continue to hamper the growth of Scottish businesses.
When you consider the other challenges that rank alongside supply chain pressures – namely labour shortages and skills gaps,, rising interest rates and paying down debt piles – then you begin to understand the magnitude of the problem facing businesses across the country.
What’s more, Scottish businesses are also having to contend with rising prices of materials and products, increased costs of suppliers, and increased customs legislation. In fact, 28% of businesses are currently focused on reducing the impact of political and commercial uncertainty in the UK, such as changing corporation tax levels, and the rollback on innovation incentives. This is a persistent and enduring theme for Scottish companies.
But where does the solution lie? Businesses across the country are taking a number of steps to support growth plans over the next six months, with our Rethinking the Economy survey showing that nearly a third are planning to invest in new software or digital capabilities to improve financial standings in 2023. As a result of supply chain issues, 52%% also intend to onshore as much as their operations as possible, with more than a third (36%) looking to access better incentives and benefits from working with new suppliers.
There’s no doubt that there are many lessons that can be learnt from the last five years of supply chain disruption – most notably, that building resilience within the manufacturing process and supply chains has taken priority over efficiency. This is a seismic step-change after 30 years of Kaizen, Lean and Six Sigma methodologies – industry recognised ways to increase customer satisfaction, realise lasting improvements in company results, and to continually enhance processes and procedures, and the way businesses operate.
To build resilience, business leaders are now looking to localise and have continuity of supply. They are trying to ensure they have multiple options for transport methods (air, road, sea and rail), and multiple service providers to ensure supply. Firms are investing in technology to give them both better visibility of supply throughout their supply chains, and capabilities to model scenarios that may affect supply. This modelling will enable instant and effective decision making in the event of any future disruptions, either locally or globally.
The most incredible thing we have learned is how resilient the Scottish workforce is to ensure supply of vital services and goods. When faced with adversity, business functions have collaborated, often remotely, using new technology to overcome unimaginable events successfully.
It’s fair to say that the pressures are great on businesses, and the issue of supply chains is high up on the agenda. How businesses navigate the next few months and beyond will depend on geo-political and economic factors that are largely out of their control, but it will also depend on the approach and mind set of individual businesses in how they respond to these challenges.
