It was found that 6 out of 10 companies are pursuing supply chain diversification to prepare for the uncertainty caused by the prolonged war and the US-China trade conflict.
According to a survey conducted by the Korea Chamber of Commerce and Industry on the 21st of 302 manufacturing companies that procure raw materials and parts from overseas, 60.3% responded that they have prepared or are considering plans to replace raw materials and parts currently being imported. 18% of companies responded that they had “already prepared measures,” and 42.3% responded that they were “reviewing measures.”
As the Russia-Ukraine war and the trade conflict between the U.S. and China prolong, they are looking for ways to stably procure raw materials and parts.
The proportion of companies that suffered damage during the overseas procurement of raw materials or parts was 38.7%, down 28.3 percentage points from two years ago (67.0%). This is interpreted to be because the spread of COVID-19, which was the main cause of supply chain uncertainty, has eased.
The war between Russia and Ukraine (45.7%) was cited as the biggest factor in damage to the import supply chain this year (multiple responses). This was followed by the continued aftermath of the coronavirus (31.0%), the US-China trade conflict (28.4%), environmental and carbon neutral regulations (11.2%), and the war between Israel and Hamas (7.8%).
Specific damages included increased costs due to increased unit prices (87.9%), logistics disruptions (27.6%), and production disruptions due to procurement delays (24.1%).
As an alternative, companies were found to most prefer diversifying overseas customers (34.7%, multiple responses). This was followed by ▲domestic procurement of imported raw materials and parts (25.7%), ▲change of existing overseas business partners, and ▲in-house production of imported raw materials and parts (4.0%).
In addition, companies ranked ‘logistics and customs clearance support through diversification of procurement sources (33.7%)’ as a government policy task necessary to stabilize the supply chain. Following this, ▲Provision of information to secure new procurement sources (20.0%, multiple responses) ▲Support for local production of imported items (24.3%) ▲Strengthening diplomatic cooperation for stable trade (14.3%) ▲Securing stable inventory by expanding government stockpiles (7.3%) followed by
Kim Hyun-soo, head of the economic policy team of the Korea Chamber of Commerce and Industry, said, “The government must take full action to diversify the supply chain, including supporting new supply lines and logistics,” and added, “We plan to investigate and monitor the status of damage to the supply chain and response in the future.”