UK businesses to move from ‘just in time’ to ‘just in case’ supply chain model

New research from SAP has found that almost every UK organization admits their supply chain needs improving, and over half (58 percent) think their supply chain needs significant improvement.

In response, 84 percent of UK businesses are planning to move on from the 50-year-old ‘just in time’ supply chain model, which prioritized costs above all else when selecting suppliers, to a ‘just in case’ approach.

The findings from SAP’s “Tomorrow’s supply chain: disruption around every corner” report highlights that since the start of the pandemic, supply chain issues have been disastrous for organisations in the UK.

66 percent of businesses have experienced delays in production of goods/delivery of services, 64 percent have seen revenues decrease and 58 percent have experienced a loss of customers. Given this outlook, it is unsurprising that almost a quarter (23 percent) of businesses expect supply chain issues to last until Summer 2023.

Earlier this year, the UK Chancellor Rishi Sunak said: “The supply chain crisis felt by so many businesses could in fact provide an impetus for companies to improve productivity, and thus ensuring higher wages are not cancelled out by rising inflation.”

But the picture for UK businesses tells a different story. For many, increasing the price of their products/services isn’t an option to cover increases in supply chain costs. Instead, staff will bear the brunt of any cost rise, with 68 percent expecting wage/recruitment freezes and 61 percent planning job cuts.

Though most UK businesses are looking to the government for supply chain recommendations, they are torn over the advantages and disadvantages of deglobalization. The majority (72 percent) of UK businesses think deglobalizing the UK’s supply chains would be disastrous to economic growth but over half (56 percent) plan to prioritize UK-based supply chain solutions.

Michiel Verhoeven, Managing Director SAP UK & Ireland, says: “The challenges and uncertainty facing so many UK businesses has meant that, for the majority of consumers, the days of wandering into a supermarket and seeing full shelves of produce now seem like a distant memory.

“Where once supply chain management was mostly about cutting costs, businesses are faced with the challenge of staying ahead of consumer demand, while improving resilience, cutting carbon emissions, reducing staff churn and keeping costs down. Whatever future external factors disrupt the movement of goods and services, our on-demand consumer culture is only going to increase. A novel approach is needed to meet this demand.”

Findings from the study show that UK businesses are exploring various other avenues to improve their supply chains, in particular adopting new technology and implementing new contingency measures. 70 percent plan to adopt new technology to help overcome challenges in the next couple of years, while 51 percent plan to find new environmentally friendly supply chain solutions.

Verhoeven continues: “Resilient supply chains must be sustainable, not only in terms of the environment, but sustainable against developments in technology and infrastructure in the UK and abroad. For decades, supply chain management has focused on cost – where keeping them lean and fast has been the priority. This is different from being agile and resilient. With the end of ‘just in time’ models, businesses have to start putting the same expectations on their supply chain as they do on their wider business, structuring themselves to be ‘just in case’, so that when disaster occurs, they can adapt. Those who don’t make this change are in for a very tough 18 months.”

You can access the complete “Tomorrow’s supply chain: disruption around every corner” report here.