Since the pandemic started, many companies decided to build inventory to avoid being caught short by supply chain disruptions, shifting to Just-In-Case strategy from the widely used Just-In-Time (JIT).
Such a shift could exacerbate the disruptions in the near term, but it could also provide some support to the global goods chain going forward, according to HSBC Global Research, but it does not mean that the JIT model will be abandoned for good.
“The environment is very dynamic. We have decided to closely follow up our inventory levels to make sure we are ready and that we can meet demand,” says Karapinar.
“This is one of the major decisions we have taken,” she says.
In addition to building up inventory, businesses have already taken a number of steps to help mitigate future trade shocks, including diversifying markets or looking at alternative markets to shift production and distribution during the pandemic, even if it is temporary.
Some are also looking to nearshore to potentially bring some of their production home or source a bit closer to home. Another long-term strategy is vertical integration as well as digitisation to help secure the supply chain.
“If we're talking about short to medium term, look into sourcing from countries that are closer to your market,” says Jarmache.
“We have seen some clients that were sourcing typically out of Asia, who went into Central Europe with a 6% increase of costs but a shorter transit time to come back into the Middle East,” he says.