New CFO Outlook Survey Contains Supply Chain Management Implications

BDO recently released their 2020 Manufacturing CFO Outlook Survey, which includes some supply chain-specific findings that may be of interest to SCMR readers, especially around the impact of trade and tariffs. 21% of middle market manufacturing CFOs report experiencing an interruption to their supply chains due to government restrictions in the last 12 months, the survey found.

Additional supply chain-related findings include (among others):
• 35% of respondents raised prices on goods in the last 12 months in response to tariffs
• 43% considered domestic alternatives for supply sourcing, and 31% considered reshoring production to the U.S.
• Respondents rank cost control as their #1 supply chain challenge (34%), followed by accurate demand and inventory management (21%) and accurate relationship management (18%)

Readers can view the full survey report here.

Jeffrey Pratt, BDO's Supply Chain Leader, shared more observations in an exclusive interview.

Supply Chain Management Review: Has the U.S. tariff threat softened somewhat since you published this study?

Pratt: With the signing of USMCA as well as the announcement of the Phase 1 China Trade deal and avoidance of increased China and US tariffs in the short term, supply chain executives have more certain context for their global supply chain decisions.

SCMR: What about the timing?

Pratt: The uncertainty during some of these negotiations made long term decisions complex. That said, there are still a number of unknowns related to Brexit, and whether the Phase 2 China Trade deal will occur in the near future. For that reason, many supply chain professionals are still actively cultivating and maintaining alternative options to mitigate risk.

SCMR: What other cautionary notes do you have on the trade outlook?

Pratt: While tariffs have been top of mind for the last 2 years or so, there are other, less intuitive factors that can cause global supply chain disruption. The coronavirus is a recent example of a situation that escalated quickly. Wuhan is China's largest site for pharmaceutical manufacturing, so there are significant implications for drugmakers and other healthcare providers.

SCMR: How serious has this become?

Pratt: Face masks are already sold out around the world, and there may be other shortages that could be majorly disruptive. Supply chain professionals and other executives have the responsibility of evaluating and proactively monitoring potential supply chain disruptions, devising alternative options and risk mitigation strategies before it becomes a crisis situation.

SCMR: Have U.S. supply chain managers heeded your advice before? An example?

Pratt: BDO works in a collaborative way to support our clients as they make decisions that fit their business strategies, so our style is not to dictate solutions. One recent example of a collaborative effort like this was in working with a distributor of educational supplies with a mixed supplier base in the US, Asia, and other geographies. We worked with this client as they devised their category strategies, considered the needs of their customers and their business strategy, and the cost/benefit of importing from China and other low-cost geographies.

SCMR: What was the final outcome?

Pratt: As a result, our client has a proactive category sourcing and supply chain plan, with appropriate risk and total cost models, so they can make informed decisions and balance their opportunities and risks.

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