Sameer Anand, supply chain leader with EY-Parthenon Americas, discusses how retailers and brands are altering their sourcing strategies in response to the latest global supply chain disruption.

Multiple categories of consumer products have been impacted by the attacks on shipping in the Red Sea, Anand says. The result has been extended lead times for getting goods to market, as some retailers divert shipments around the Cape of Good Hope, while others opt for air freight. Either way, they’re being saddled with higher costs, which must either be absorbed by carriers and shippers, or passed on to the consumer.

Even as they struggle to cope with the crisis of the moment, retailers are adopting long-term strategies for adjusting to future disruptions. For some, that means shifting or diversifying sourcing among multiple regions — again, a high-cost move that nevertheless must be considered if retail supply chains are to be truly resilient. 

In a sense, the recent actions by retailers are simply the acceleration of a trend that was underway long before the Red Sea attacks. Manufacturers were already moving to reduce their reliance on China as a source of low-cost production, by shifting to Southeast Asia, Mexico, other parts of Latin America and even the U.S. The difference, says Anand, is that scenarios and analyses are now being turned into strategies and action plans which manufacturers are beginning to execute.

The future is likely to see more regional diversification and reliance on multiple suppliers, as retailers, brands and manufacturers look for ways to create truly resilient supply chains that can quickly adjust to any type of disruption, whether caused by humans or nature. Anand says they’re approaching the subject through multiple dimensions, including considerations of productivity, cost, resilience, agility and sustainability.