Gartner says supply chains must reduce their surface area risk to reduce the frequency of disruptions

Chief supply chain officers (CSCOs) must strategically reduce the rate of disruption to their supply chains by reducing their surface areas, according to Gartner research which shows that disruption-shaping organizations are likely to experience less than one-third of disruptions than their peers. Gartner defines supply chain surface areas as the sum of all the products, processes and networks that compose the supply chain today and represent touchpoints that risk events can have with the supply chain.

“With a higher cadence of risk event, a smaller surface area is an asset, a large surface a major liability. CSCOs can’t control how many risk events will happen, but they can control the size of the target they want their organization to be.” said Suzie Petrusic, director research with the Gartner Supply Chain practice. Many supply chains are easy to disrupt because they pose a large target. They expanded over decades and dispersed risk across a global network, while optimizing cost. Processes became more complex and required a lot of movement of goods and material within the supply chain – a system that is easy to disrupt.

For disruption shapers, reducing disruption is part of the strategy planning process, considered along with cost, quality and speed. However, this does not mean abandoning the strategic business objectives of past decades. Instead, CSCOs can redefine cost optimization by including the cost of constant disruption in their calculations. Disruption-shaping organizations benefit in multiple ways. Their approach reduces costs to the supply chain because the organization experiences fewer disruptions overall. When a disruption happens, the network is more likely to be prepared and recovery will take less time.

Source: Gartner Date: July 13, 2021

Effects on Costa Rican exports

Gartner provides strong evidence of why different companies around the globe are nearshoring, a trend for which Costa Rican suppliers offer a lot of advantages. Besides the country’s important logistic advantages for companies in North America, Costa Rica has strong experience in providing high quality products to the medical devices (MD) and aerospace industries.

According to MPO and CINDE, Costa Rica hosts 5 of the top 10 MD manufacturers in the world (2020). Strong investments of these global companies have fostered the establishment of suppliers and a life-sciences ecosystem. For example, Costa Rica has more than 20 tool shops making precision components, device & instrument subassemblies for Orthopedic, Spine, Cardiovascular and other applications using CNC turning and milling, swiss machining, EDM, laser welding, grinding, stamping, heat treatments, etc. According to PROCOMER data, local purchases of medical devices OEMs in Costa Rica have grown at a CAGR of 19% during 2015-2019.

In the aerospace sector, since 2015 the country established the Costa Rica Aerospace Cluster (CRAC), with companies that supply OEMs tier 1 to tier 3. This offer is specialized in electromechanical systems for various critical and non-critical systems, development and testing of software embedded under the highest standards and certifications and MRO services with +50 years of experience. In 2020, USA was the main destination for the exports of these suppliers, accounting for 86%, which reflects a strong knowledge about this market. Besides, these companies comply with highly demanding certifications, such as ISO 13485, AS9100, NADCAP, ISO 9001, ISO 17025, ISO 14001 and ISO/TS 16949.

Our suppliers can offer you different business models, such as strong cost reduction programs, contract manufacturing facilities, dedicated teams, capacity for prototyping and R&D, among others. All of the above, added to the Costa Rican preferential access to 2/3 parts of the world’s GDP through free trade agreements and its logistic advantages due to its geographic location, make the country an ideal partner for nearshoring.