Supply Chain Costs Should Now Be Top Priority for Executives, CEOs Say

As record-high freight rates and shipping disruptions continue to plague companies, a new survey from Gartner has identified cost optimization as the number-one issue that CEOs want supply chain executives to focus on today.

Among 199 leaders in supply-chain-intensive industries, 17% said cost was their highest priority, while 16% said it was supply chain resilience. Both have become urgent issues during the pandemic as factory shutdowns, worker shortages, backlogged ports, store closures and warehousing challenges have driven up costs and forced companies to seek out alternate supply chains to meet demand.

“CEOs are tasking their chief supply chain officers to focus on navigating through the ongoing disruption and ensure business continuity,” said Thomas O’Connor, senior director analyst with the Gartner Supply Chain practice. “This includes dealing with pandemic-related lockdowns in key markets, supply chain shortages – as seen in the semiconductor industry – and challenges with the global flow of goods and increasing distribution costs.”

While resilience has been a ubiquitous topic of discussion for executives throughout the pandemic, supply-chain costs have in recent months escalated to the point that brands are raising prices for consumers, driving ongoing inflation. In June, U.S. footwear prices jumped 6.5% year-over-year, higher than the consumer price index’s overall increase of 5.4%.

In earnings calls, footwear brands and retailers have repeatedly called out rising costs for weighing on results. Nike CFO Matthew Friend said last month that the company expects “supply chain delays and higher logistics costs to persist throughout much of fiscal 2022.” Steve Madden, meanwhile, blamed freight disruptions for cutting into margins as well as causing a revenue hit of around $15 million in the first quarter.

In its second-quarter Shoe Business Outlook survey, the Footwear Distributors and Retailers of America found that 49% of industry executives reported production or supply chain costs as their greatest concern over the next six months, up from 35% in the prior quarter.

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