In our previously published Supply Chain Matters Editorial commentary, The Federal Reserve’s Interest Rate Action and the Signal for Assessment, this Editor provided a summary of likely implications that industry supply chain leaders and their respective teams should be focusing on in the coming months.
Noted was that C-Suite executives, if they have not already done so, will be calling for added assessment relative to areas that are added cost drivers in periods of higher interest rates and in potential decreases in product demand during recessionary periods. A further notion is what is top of mind among senior business executives and how do they generally view business priorities in this upcoming period.
Newly Released Conference Board CEO Study
A further data point to these notions can be found in a newly released C-Suite Outlook Mid-Year survey report, published by The Conference Board.
This survey of a reported 750 CEO’s and other C-Suite executives was conducted in May 2022, among executives based in North America, Latin America, Asia and Europe.
The noted overall theme from this survey were indications that recession. cyberattacks. Inflation are top of mind concerns. Reportedly, since Russia’s invasion of Ukraine, global CEOs are confronting a world of extraordinary volatility and uncertainty, forcing many to reassess their growth assumptions and put strategic plans on hold. In fact, nearly 8 in 10 now expect a recession in their primary region of operation within the next 12 to 18 months—or believe one is already underway.
This survey further revealed that how conflict in Europe and other geo-political developments have “scrambled the landscape of priorities facing CEO’s.”
Some of the noted findings were noted as:
Energy price volatility and higher input costs are the Ukraine conflict’s top economic impacts with CEOs reportedly citing inflation issues—volatility in energy prices and higher input costs—as the top two issues that will affect their business in the next 12 months. Among global CEOs, 38 percent indicated that rising tensions among the US and China, along with the Ukraine conflict’s implications will likely have a major impact on business operations in the next 12 months.
In the notions of widespread anxiety was an indication from 90 percent of CEOs as now concerned to some degree about Russian retaliation through cyberattacks. 44 percent are highly concerned.
Reportedly, 51 percent of CEO’s expect to mitigate inflationary impacts by passing on higher input costs to customers while 47 percent are of the view that cutting costs is another intended action.
What caught our attention was data indicating that “strengthening supply chains” was a top-of-mind action CEOs intend on taking in response to the perceived impacts of the Russia and Ukraine conflict. Reportedly upwards of 53 percent of CEO’s have a focus for making supply chains more resilient.
Regarding high global energy costs, 28 percent of CEO’s globally are noted as being motivated towards accelerating renewable energy investments.
In the area of technology, the survey authors note that senior executives view technology adoption as a key to long-term growth. Among global wide CEOs, 58 percent cite digital transformation as part of their investment plans.
Labor shortages are cited as a further concern with 57 percent indicating the promotion of hybrid work environments to attract workers while 43 percent cited increased automation.
Inventory Management Assessment- Samsung Electronics
We noted in our editorial likely needs for comprehensive inventory management assessments especially given the risk of higher working capital costs are a result of higher interest rates. Such assessments would include actions that need to be taken about existing of near-term inventory levels and carrying costs.
Nikkei Asia has reported (Paid subscription or monthly metered view) that Samsung Electronics is temporarily halting new inventory procurement orders and directing multiple suppliers to delay or reduce shipments of components for several weeks due to swelling inventories and global inflationary concerns.
Citing four informed sources, the report indicates that such actions apply to components for multiple key product lines, including TVs, home appliances and smartphones. Additionally noted is that postponement of orders involves a wide range of components across chips, electronics parts and final product packages.
Samsung’s inventory balances reportedly reached the equivalent of $36.9 billion at the end of March, representing an inventory to assets ratio of 10.8 percent, compared to 9.7 percent during the year-earlier period. Sources indicated to Nikkei that Samsung desires to more closely review its inventory levels to ensure that stocks are manageable.
The above provides two examples of current sentiments and a changing tide among global supply network participants as uncontrolled inflation, higher interest rates and concerns for an economic downturn reverberate. Certainly, such sentiments will vary by industry, company size and prior history and learning.
Supply Chain Matters has previous observed how quickly sentiments among global supply chain participants can change, and evidence is building that concerns are broadening as is added cautions.
However, there remains evidence that C-Suite executives may have gained a new awareness as to the importance of establishing new thinking and needed investments in resilience and agility, especially during concerning times.
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