President Biden’s G20 summit announcement to address global supply chain challenges not enough to guarantee “frictionless borders” as shortages and delays impact quarterly corporate earnings
President Joe Biden’s plans to address global supply chain disruptions will be a boost for businesses, but policy changes alone won’t solve the issue, according to Linda Ellett, head of consumer markets, leisure and retail at KPMG UK.
Speaking at the G20 summit at the end of October, the US president told world leaders that countries “need to increase resilience in the face of climate change, natural disasters and even planned attacks” and “cannot go back to business as usual.”
“We have to take action now, together with our partners in the private sector, to reduce the backlogs that we’re facing. And then, we have to prevent this from happening again in the future,” Biden said.
“Greater visibility across supply chains and less friction across borders is what businesses want and need,” said Ellett. “But as the physical supply chains continue to be disrupted, it’s important to acknowledge that policy changes alone won’t create frictionless borders.”
“Friction in supply chains means businesses cannot be as agile as they want to be. They lose the ability to react quickly and effectively as unforeseen challenges arise. Businesses then understandably plan for all eventualities that can lead to stockpiling.”
Many companies, including Hasbro, 3M and GE, referenced supply chain challenges in their third-quarter financial statements. In its third quarter review, Hasbro said orders of $100m failed to ship by quarter end due to supply chain disruptions, with the majority of it being delivered in the fourth quarter.
Meanwhile, the current semiconductor shortage is causing issues for large tech companies. Nintendo said on Friday the shortage has forced the firm to scale back expectations of sales for its Switch device, noting the shortage was affecting hardware development. Similarly, Apple noted the shortage has been impacting the production of MacBooks and iPads.
Tim Solms, general manager in public sector at Dun & Bradstreet, warned “it is critical that organisations and agencies collaborate – immediately – to stop further weakening of our already fragile supply chain network.”
“Private and public sector collaboration has enabled better decisioning and outcomes, particularly during times of crisis,” he added.
Solms pointed to the example of Tesla, which during the height of the pandemic pivoted its manufacturing to make ventilators for coronavirus patients following an appeal from the US government.
“We have seen first-hand how we can effectively work across governments and public and private sectors, but we need the entire global supply chain of agencies, suppliers and contactors to all work together, and to be willing to quickly pivot, in order to help each other to revive our once-thriving supply chains – a major contributor to the global economy.”
Ellett also mentioned a separate potential effect stemming from the trickle-down impact of global supply chain disruptions, which could see consumers become more conscious buyers with a longer-term purchasing horizon.
“From a consumer perspective, could we have reached the peak when it comes to consumer expectations of fulfilment?
“From a planet perspective, it would be great to think we are tipping over into a period of thoughtful purchasing, in which consumers actively choose to purchase those items they really want in advance, rather than being enticed by something exciting arriving tomorrow.”
