The troubled global scenario of recent years has profoundly affected companies, consumers and countries, prompting a redesign of globalization and changes in corporate strategy. Business managers around the world are being challenged to adjust their operations to the new context by changing their global supply structure, establishing new criteria for choosing countries and trading partners. These course adjustments are being made in a context marked by strong instability in the financial sector and under the emergence of revolutionary technologies in the field of Artificial Intelligence.
To measure and understand these transformations, we are conducting a two-phase study that already has the participation of more than 400 companies from more than 60 countries. Our research shows a changing world, with companies going in different directions according to the company’s country of origin, its size, sector and other variables. The final report, which will be released starting in July, will bring details of these changes, an opportunity to observe the decisions being made in different contexts.
The first phase of the research maps the external factors that affected companies and their impact on production and costs. The second phase will explore the strategic decisions made by the top management of the companies. See below the preliminary results of the first phase and access the questionnaire of the second stage by clicking on the link – research restricted to directors and CEOs of manufacturing companies.
Preliminary data – first phase of research
Respondents: 415 companies, 65 countries – non-probabilistic sampling
Global Turbulence: Economic sanctions, Covid and war in Ukraine. Have your company’s operations been affected by these external factors?
As expected, the overwhelming majority of respondents (92%) reported impacts of various natures. From the interruption of production to the increase in prices, from the change in the product line to the internalization of the production of some inputs, companies reacted differently depending on their sector, region of operation and degree of internationalization. In the full July report, we will present the details of these changes to better understand the paths taken by organizations.
Impact of external factors: How would you rate the impact of each external factor on your company?
Among the external factors that most affected companies, the operational restrictions caused by COVID in the supplier countries were the factor indicated as medium or large impact for 84%. COVID also affected medium or large impact on imports of 77% of companies, and the interruption in operations was reported as medium or large impact by 74% of companies. Also indicating medium to high impact were 65% of the responding companies that have been affected by restrictions associated with Geopolitical factors, particularly economic sanctions determined by different countries in recent years.
Lastly, 42% of respondents reported medium and high levels of impact of military conflicts in recent years, especially the war in Ukraine, on their businesses. While COVID-related factors have reasonably homogeneously affected different company profiles, geopolitical and military factors are significantly more important for some groups of companies. These details will be presented in the final report in July along with data from other external factors also evaluated.
Changes in operations: What were the actions implemented by your company to deal with these external factors?
Companies sought alternatives to maintain their operations or shorten their disruption. Depending on the country, sector, size and other factors that will be presented in detail in the final report, specific actions or a combination of actions have been used to mitigate the effects of external factors.
The data quantifies a scenario of great turbulence for organizations in recent years. 80% of companies reported that the search for new suppliers abroad was an action classified as medium or high importance for the company to face the adversities of the business environment. 77% reported that searching for suppliers in their country was also an important action. Similarly, 69% had to resort to partial interruption of their production lines, while 64% chose to internalize the production of items previously purchased from suppliers. Even with the search for these alternatives, 50% indicated that at least temporarily they were forced to totally suspend their operations. In the final report, we will present other actions implemented by the companies and their details by country, region, size and sector.
Global Supply Chain and Operations: Have your operations been paralyzed due to international supply issues?
The problems with the international supply of inputs caused great damage to companies. Although they sought alternatives such as those presented above, 52% of the companies participating in this study indicated that they had stopped their operations for at least a short period of time, and another 22% of the companies were paralyzed for a long period. With the damage caused by these interruptions, it is expected that there will be careful reflections in the coming years on the overall supply structure and the search for more robust solutions to ensure continuity of operations.
Global Supply Chain and costs: what is the impact of problems in international supply on your production costs?
Sudden changes in the international supply structure were expected to increase companies’ costs, a fact pointed out by 82% of respondents. 60% of the participants in this study indicated that their costs were significantly elevated, in addition to another 22% of respondents who indicated that they had a moderate increase in costs. It is worth mentioning that 7% of companies reported a reduction in their costs in the search for new suppliers.
Global Supply Chain and costs: what is the impact of problems in international supply on your production quality standard?
A still large percentage (60%) of companies reported problems with the production quality standard due to the international turbulence of recent years. 22% of companies indicated that many of their product lines were adversely affected by global supply issues, and another 38% indicated that at least a portion of their lines were harmed. At the other extreme, 11% of companies took advantage of the opportunity to make adjustments and managed to increase their production standards.
Nature of the changes: Have the changes implemented in your company in the face of the global turmoil of recent years become permanent?
The war in Ukraine and the international relations between the main economies of the world remain fragile, even with the overcoming of the pandemic. In this context, most companies have chosen to make permanent all or part of the changes implemented in recent years. This indicates that the adjustments are not a contingent action, but a structural change with lasting effects for the company and, in the aggregate, for international economic relations.
Loser countries: please tell us which countries your company stopped importing from?
With the search for suppliers in other countries and internalization of processes, some countries are no longer on the list of sources of productive inputs for the companies participating in this study. As the largest global exporter, China was also the country that lost the most exports due to the global turmoil of recent years, with 37% of companies reporting that they reduced their imports or stopped importing from that country. Second in our study, Russia lost space in international purchases by 9% of the companies surveyed, something significant for a country that ranks only 11th among the world’s largest exporters in WTO statistics. In the final report of the survey, we will present the complete list of countries that have lost exports and details of the profile of companies (size, region, sector, etc.) that have stopped buying from these countries.
Winning countries: Which countries have joined your supplier list?
By ceasing to import from these countries, many companies have sought other countries to replace their supply. Once again, China was named at the top of the list, with 15% of participants in this study indicating that country as a new supplier. The United States and India follow with 7 percent and 5 percent respectively. In the final report, more details about countries and the profile of the companies that included them in their supplier lists.