In 2022, 47% of executives favoured diversification as the primary supply-chain strategy. While this dropped slightly to 45% in 2023, it remained the most common response.

However, a significant shift emerged as 26% of companies opted to work with fewer suppliers, up by 16 percentage points from the previous year. On the face of it, this is counterintuitive.

But on the one hand, as more companies set up redundant capabilities in the form of dual supply chains, the diversification of suppliers increases. While on the other hand, businesses that are focused more on capacity building are favouring working with fewer suppliers.

This trend towards streamlined supplier engagement was consistent across regions and sectors, reflecting a structural evolution in supply-chain practices.

Enhancing supplier relationships can be crucial for resilience, enabling risk-sharing, resource access and increased productivity.

Furthermore, reducing suppliers may help streamline operations to align better with changing regulations, like the EU's Carbon Border Adjustment Mechanism.

Meanwhile, diversification or establishing dual supply chains would allow companies to service different markets with distinct regulatory landscapes more effectively.

This transformation underscores the growing significance of strategic supply-chain decisions in today's business environment.

In 2024, transport costs are predicted to be the leading obstacle for firms aiming to increase exports, as highlighted by 24% of respondents, akin to past years.

Despite shipping rates having fallen from their 2021/22 peak and an expected surge in cargo ship availability poised to further lower costs, the looming rise in oil prices due to production cuts threatens to counter these gains. Compounding this, a 2022 report identified a global shortage of over 2.5m truck drivers, exacerbating supply-chain strains.

Furthermore, last-mile delivery, constituting a substantial portion of shipping and overall supply-chain expenses (53% and 41%, respectively), is becoming even more critical with the uptick in online sales.

Navigating these challenges—fluctuating costs, logistical deficits and changing consumer behaviour—remains an essential facet of contemporary trade and commerce.

Executives’ optimism contrasts with broader trade projections, signalling uncertainty for trade and supply chains in the upcoming year.

Their positivity stems from various factors, notably the enthusiasm generated by new technologies designed to enhance supply-chain efficiency and visibility, cited by 34%—a nine percentage point increase from the previous year.

Additionally, 30% of executives attribute their optimism to improved economic stability and growth, marking a seven percentage point increase from 2022.

The anticipation is that easing supply-chain dislocation will lead to lower inflation across most markets in 2024. This, coupled with the end of monetary policy tightening, suggests light at the end of the tunnel.

But, this discovery underscores the multifaceted nature of trade and supply chains, emphasising the need for executives to stay vigilant and responsive to market and sector-specific dynamics.

In response to concerns over escalating supply-chain costs, 34% of companies are banking on AI to curtail overall trade expenses. Studies indicate that adeptly incorporating AI into supply-chain management has empowered pioneers to reduce logistics costs, slash inventory levels and elevate service levels.

Furthermore, AI is anticipated to bolster supply-chain planning and minimise disruptions, solidifying its pivotal role in reshaping the future of efficient and resilient supply-chain operations.

In 2023, companies maintained 9.0 weeks of inventories, compared to 10.1 in 2022 and 8.9 in 2021. This signals a slight recalibration in 2023, likely due to the capital intensity behind higher inventories.

Notably, 34% of executives are using digital tools to improve inventory management, the top strategy for cutting supply-chain costs. Additionally, 35% have employed AI to optimise inventory levels, emphasising the rising reliance on technological solutions.

With companies losing around US$1.8trn annually due to inventory issues, efficient inventory management is crucial.

Solving these issues could potentially lead to a significant 10.3% increase in sales, showcasing the direct impact of streamlined inventory on business growth.

Yet, this needs to be balanced against business resilience strategies as another black swan event could further impede businesses with significantly reduced inventories.

In a hypothetical scenario, disruptions in high-tech trade between a US-led Western bloc and a China-led Eastern bloc are projected to cause a short-term global GDP decline of 0.9%. The impact falls heavily on China's economy, which is forecast to decrease by 1.9%, while the US and other Western bloc countries are set to decline by 0.9% and 0.8%, respectively.

If a 15 percentage point tariff increase on all traded industrial goods occurs, global GDP is expected to contract by 0.7%. This change would disproportionately affect politically aligned blocs: China's economy would suffer a substantial 4.5% decline, the rest of the Eastern bloc by 1.3%, while the US and neutral countries would experience marginal benefits, growing by 0.2% and 0.7%, respectively, due to trade diversion.

Geopolitical shocks continually disrupt global trade, driving the restructuring of supply chains to centre stage. Our own analysis on fragmentation predicts that bloc restructuring with increased trade barriers could decrease global GDP significantly.

This underscores the critical need to balance economic factors (like cost and quality) and non-economic concerns (such as security and resilience) in supply chains.

In response to geopolitical events, 36% of respondents prioritised ‘friendshoring' while 32% were creating dual supply chains-–such as the 'China+1' strategy. These strategies aim to boost resilience but might raise costs for businesses juggling multiple supply chains.

Achieving this balance is pivotal in navigating the changing global trade landscape.

Almost a quarter (24%) of executives highlighted achieving a faster time to market as the key outcome in their company’s supply-chain approach in the past year. Surprisingly, only 8% reported experiencing a slower time to market, indicating a clear priority in this domain.

This urgency stems from consumer expectations for swift order fulfilment, compelling businesses to reduce lead times to enhance customer satisfaction and potentially bolster retention.

Shorter delivery times not only please customers but also streamline supply-chain operations by reducing the need for high inventory levels that tie up working capital.

Additionally, they offer increased flexibility in planning and forecasting demand, enabling better adaptability to market conditions and shifts in consumer preferences.

Primary growth drivers for business exports are split, with 26% of surveyed companies expanding into new markets (a six percentage point rise from 2022) and 24% focusing on existing market expansion (a one percentage point reduction from 2022).

This reveals a delicate balance: pursuing growth while bolstering resilience through wider market engagement.

Diversifying export markets is vital for resilience, helping to mitigate the impact of economic downturns or geopolitical crises in specific markets.

Five surveyed sectors (consumer goods, energy and natural resources, health and pharmaceuticals, industrial, and logistics and distribution) prioritise new market expansion, while one emphasises existing markets (food and beverage).

Moreover, executives highlight that global import growth is predominantly fuelled by demand, which over a quarter of survey respondents cited.

Recent data, like the upturn in South Korean exports—considered a barometer of global demand—underlines the pivotal role of demand in driving imports.

Businesses are grappling with a multitude of challenges—macroeconomic uncertainty, geopolitical shifts, technological advancements, and the looming spectre of climate change.

They navigate these via pivotal strategies, such as single sourcing, dual supply-chains and reducing lead times. With this complexity, having a clear strategy before adjusting the supply chain becomes paramount.

Our survey reveals that not all supply-chain alterations proceeded as intended: 24% witnessed a faster time to market, yet 8% encountered a slower pace; 21% experienced reduced transport costs, yet 13% faced heightened expenses; 18% had lower administrative costs yet for 11% these costs increased; and 16% noted a decrease in supplier sourcing expenses, while 11% saw an increase.

Reactivity to events could yield unintended consequences, necessitating a nuanced consideration of regional disparities, sector-specific needs, and internal management systems.

Embracing diverse approaches is the new norm, but customising strategies to account for unique business demands is crucial for successful supply-chain adaptations.