Bringing manufacturing back to the United States is a top priority for the Biden administration, but a new report from Citi indicates that companies might have other priorities when it comes to securing their supply chains.
“The pandemic and then the war in Ukraine demonstrated the fragility of supply chains," said CEO Jane Fraser in a forward to Citi's second annual report on supply chain finance. "While reshoring and nearshoring may seem like the next steps, buyers and suppliers alike indicate that the higher priority is resiliency or redundancy deeper into the supply chain."
From a national perspective, reshoring is a step toward resiliency and redundancy. But for individual companies, it's a little more complicated.
For example, the report noted that many companies are prioritizing increasing the geographical diversity of their suppliers over building new facilities in their home countries. That way, if something goes wrong in one part of the world (a war, for example) they can rely on suppliers not from the impacted region.
In addition, many companies are focusing their efforts on building inventory buffers, which are sort of like rainy day funds but for physical goods. Again, this is a very different strategy than developing new supply chains on national soil.
The tough part about keeping extra inventory or buffers, though, is that it costs money. Just ask Target or Walmart. Both companies built up too much inventory during the pandemic and were forced to offer steep discounts to customers just to clear their shelves, which significantly lowered their profit margins.
For Citi, a major bank, the answer is more working capital for supply chain needs. "To help ensure the financial health of supply chains and mitigate risks, buyers and suppliers want to ensure they have ready access to financing, when and where it is needed," read the report.
However, Citi stressed that rising interest rates are not making financing any more accessible.
"The cost of capital continues to climb for both organizations large and small," it said. "Buyers should be mindful of how this negatively impacts companies’ working capital needs across the supply chain and adversely affects small suppliers."
Nestlé has dismissed its CEO Laurent Freixe after an investigation into an undisclosed relationship with a direct subordinate. The company announced on Monday that the dismissal was effective immediately. An investigation found that Freixe violated Nestlé’s code of conduct. He had been CEO for a year. Philipp Navratil, a longtime Nestlé executive, will replace him. Chairman Paul Bulcke stated that the decision was necessary to uphold the company’s values and governance. Navratil began his career with Nestlé in 2001 and has held various roles, including CEO of Nestlé's Nespresso division since 2024.
Kraft Heinz is splitting into two companies a decade after they joined in a massive merger that created one of the biggest food companies on the planet. One of the companies will include brands such as Heinz, Philadelphia cream cheese and Kraft Mac & Cheese. The other will include brands like Oscar Mayer, Kraft Singles and Lunchables. When the company formed in 2015 it wanted to capitalize on its massive scale, but shifting tastes complicated those plans, with households seeking to introduce healthier options at the table. Kraft Heinz's net revenue has fallen every year since 2020.
About 780,000 pressure washers sold at retailers like Home Depot are being recalled across the U.S. and Canada, due to a projectile hazard that has resulted in fractures and other injuries among some consumers.
