91% of Companies Expect Supply Chain Conditions to Remain Similar or Worsen in Second Half; Only 9.3% Report Improvement

Negative Perceptions Increase Regarding Supply Chain Conditions in the Second Half of the Year

[Asia Economy Reporter Sunmi Park] A survey revealed that domestic companies have a high negative perception of supply chain conditions for the second half of this year. Nine out of ten companies responded that global supply chain instability will continue in the second half, while only 9% believed it would improve.

On the 3rd, the Federation of Korean Industries (hereafter FKI) conducted a survey targeting the top 1,000 manufacturing companies by sales (with 150 companies responding), and companies rated their current supply chain competitiveness at an average of 58 points out of 100 (with 0 points indicating very low competitiveness and 100 points indicating very high competitiveness based on self-assessment).

Companies that suffered from global supply chain issues over the past two years cited ‘pandemic risk (35.3%)’ due to regional lockdowns caused by COVID-19, ‘geopolitical risk (30.7%)’ such as the Russia-Ukraine war and international political instability, and ‘logistics and transportation risk (27.5%)’ including transport delays and strikes as the main factors.

Regarding whether companies are considering global supply chain readjustments, the largest group (44.0%) answered that they are ‘reviewing countermeasures,’ while 35.3% plan to review them in the future. Conversely, 14.7% said they have no plans to review, and only 6.0% have already established specific countermeasures.

Many companies expected the global supply chain conditions in the second half of this year to be similar (48.0%) or worse (42.7%) compared to the first half. Only 9.3% anticipated any improvement compared to the first half.

Additionally, the regions of greatest concern for supply chain environments in the second half were predicted as follows: for ‘production and import’ ? China and Taiwan (51.4%), Russia and the Commonwealth of Independent States (CIS) (24.0%), and the European Union (EU) (3.3%); for ‘sales and export’ ? Russia and CIS (31.3%), China and Taiwan (26.7%), and the United States (7.3%).

Regarding internal measures that companies are actively pursuing to improve supply chains, the most common was ‘establishing alternative supply chains by procuring materials and parts from multiple companies (38.3%),’ followed by ‘producing the same products at other bases (22.1%),’ ‘expanding inventories of materials, parts, and products (12.1%),’ ‘increasing smart manufacturing and production automation rates (11.1%),’ and ‘digital transformation of supply chain management systems (11.1%).’

Meanwhile, government support policies deemed necessary for supply chain improvement included providing information and support for diversifying suppliers (32.3%), strengthening global supply chain monitoring and crisis warning systems (22.0%), advancing management and support systems for supply chain risk-sensitive items (17.3%), supporting and expanding testbeds to increase the localization rate of materials and parts (15.7%), and expanding domestic investment attraction from foreign companies (4.7%).

Yoo Hwan-ik, head of the FKI Industry Division, emphasized, “As supply chain disruptions caused by the prolonged COVID-19 pandemic and the Ukraine crisis intensify, coupled with concerns over a global economic downturn, policy support for our companies is becoming increasingly important.” He also stated, “To actively respond to complex supply chain risks, it is necessary to promote diversification and digitalization of supply chains, focusing on small and medium-sized enterprises and mid-sized companies with weak competitiveness.”

This content was produced with the assistance of AI translation services.