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70% of Japan execs plan changes to supply chain: Nikkei survey

TOKYO — Seven out of 10 Japanese companies with domestic plants will revise their supply chains, a Nikkei survey shows, highlighting corporate efforts to find a new normal in light of continuing risks from the novel coronavirus.

Many business practices are likely to change, as the pandemic remains far from over and companies still face restrictions.

The survey of presidents and other top leaders of major companies was conducted May 25-28, after Japan lifted the last remnants of a nationwide coronavirus state of emergency. Responses were received from 132 businesses.

Of companies that operate factories in Japan, 72.1% cited a need to alter supply chains. Asked what they intend to change, 65.3% said they want the ability to switch sources with greater flexibility in case of a crisis, and 57.1% indicated they will stop purchasing from a single country in order to diversify sources. Multiple responses were allowed.

As for safety steps those with factories are taking, 75% are conducting temperature checks of workers and 60.2% are putting more space between staff.

The pandemic also is changing how people work, as 90.9% of the companies plan to continue a telecommuting policy for offices.

In all, 63.2% of the respondents said half or more of their workers will telecommute, including 4.6% who said all workers will do so. And 89.4% intend to introduce flexible hours to reduce the density of people at the workplace.

The pandemic has accelerated the shift toward digital, with 63.6% looking to increase such investment. Spending on equipment to enable remote work was cited by 87%, while 63.6% intend to bolster security. And 61% plan to allow internal paperwork to be handled online, signaling a change in the Japanese business practice of stamping approval seals on paper documents.

The survey revealed widespread concern that the economic slump will drag on, as 41.5% of the companies do not expect their markets to return to pre-pandemic levels for a year. A two-year recovery was anticipated by 29.3%.

“The pace of recovery is mixed depending on the sector and region, so it will take three years for us to feel an overall recovery,” said Kohei Morikawa, president and CEO of materials maker Showa Denko.

Many business leaders worry about losing customers, as lifestyles and economic activity changed while consumers were holed up at home for an extended period. Companies will need to make the most of new business opportunities, which may require changes.

“We are introducing a low-priced private brand for frugal consumers in addition to offering premium goods to those tired of saving money,” said Takashi Sawada, president of convenience store chain FamilyMart.

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