Since the onset of the COVID-19 pandemic, we have asked supply chain leaders annually about their efforts to overcome disruptions, mitigate risks, and build resilience in their operations. Our third and most recent survey shows that companies have made significant progress on measures that have been on their agenda since the start of the crisis, and that work has helped them weather supply chain challenges such as geopolitical disruption and the worldwide shortage of semiconductors.

For example, over the past year, many companies have made structural changes to their supply networks by implementing dual or multiple sourcing strategies for critical materials and moving from global to regional networks. And as companies shift their focus from visibility to improvements in demand and supply planning, supply chain digitization efforts are also entering a new phase.

However, most respondents admit that they still have significant work to do. An acute shortage of talent is holding organizations back in their efforts to accelerate digitization and implement advanced planning systems. And despite progress over the past 12 months, many companies still lack a comprehensive picture of the risks lurking deep inside complex multitier supply networks.

Data for this year’s survey were collected from 113 supply chain leaders worldwide, representing organizations from a broad range of industries. We ran the survey over a three-week period from the end of March to the middle of April 2022.

Network resilience: Footprints on the move

The turbulence of the past two years has forced many organizations to address vulnerabilities in their complex, highly globalized supply networks. But the 2020 and 2021 supply chain pulse surveys revealed a significant gap between respondents’ ambition and their action. While many respondents said they wanted to diversify their supply base and boost in-region sourcing, the most common action in response to disruption was increases in the inventory of components and finished projects.

Bigger buffers and safety stocks are still seen as an important tool for supply chain resilience. Eighty percent of respondents told us that they increased their inventories during 2021; separate McKinsey analysis of almost 300 listed companies found that inventories increased by an average of 11 percent between 2018 and 2021, with the largest increases in the high-tech and commodity sectors. Some supply chain leaders have told us that they would have increased inventories even further if suppliers had been able to meet their requests.

While higher overall stock levels have become the norm, our survey suggests that companies are now looking for smarter ways to ensure resilience while keeping inventory costs under control. Seventy-one percent of respondents expect to revise their inventory policies in 2022 and beyond (Exhibit 1).

Companies are also reporting significant progress in longer-term strategies designed to increase network resilience. For example, 81 percent of respondents say that they have implemented dual-sourcing strategies during the past year, up from 55 percent in 2020. Forty-four percent of respondents, up from 25 percent the previous year (an even larger relative jump), say they are developing regionalized supply networks (Exhibit 2). Most respondents expect this momentum to continue. Sixty-nine percent of supply chain leaders told us that dual sourcing will continue to be relevant in 2022 and beyond, and 51 percent think the same about regionalization.

Overall, our survey shows that disruption has reshaped almost every supply chain. Ninety-seven percent of respondents say they have applied some combination of inventory increases, dual sourcing, and regionalization to boost resilience. Supply chain leaders believe that these efforts are paying off: Eighty-three percent told us that the footprint resilience measures they have taken over the past two years helped them minimize the impact of supply chain disruptions in 2022. For example, respondents from the commodity, consumer goods, and chemicals sectors were most likely to say that recent geopolitical disruption has not resulted in significant supply chain challenges this year; it is these industries that have focused most on structural changes such as nearshoring or network redesign. This situation may change as disruption continues, however, since data collection for our survey was conducted in the spring of 2022.

Supply chain planning: A winning formula

The volatility of the past two years has rigorously tested planning teams. Our survey reveals a formula, with three key ingredients, for resilient supply chain planning (Exhibit 3).

The first of those is visibility—companies can manage their supply chains only when they have a clear picture of each link. This is one area where organizations report significant recent progress: sixty-seven percent of respondents have implemented digital dashboards for end-to-end supply chain visibility. And those companies were twice as likely as others to avoid supply chain problems caused by the disruptions of early 2022.

The second ingredient is robust scenario planning, which can be seen in the planning counterpart to footprint redesign. Scenario planning has not been as widely adopted as visibility tools, with only 37 percent of respondents saying they had implemented the practice. These companies are also twice as likely as others to have avoided supply chain challenges this year.

An essential foundation to both supply chain visibility and effective scenario planning is comprehensive, accurate master data. Just over half the respondents tell us that the quality of the data in their supply chain planning systems were “sufficient” or “high,” suggesting that many companies still have room to improve their data collection and data management processes. High-quality data were associated with lower levels of recent supply chain disruption, although the effect was less pronounced than with visibility or scenario planning.