Covid 19- has interrupted global supply chains, leaving companies scrambling for alternate ways to keep operations running smoothly. However, businesses can learn lessons from this global disturbance. There is a need of creating flexible, diverse supply chains and technology will have a larger role to play to build up business resilience. Covid-19 was sudden and its full impact was unexpected and supply chains were unprepared.
Even as the world gears up to return to a ‘new normal’ in terms of life and work after the lockdown, several industries and businesses will be looking to implement the learning’s from the COVID-19 pandemic in order to prevent any future disruptions. The logistics and the supply chain industry has witnessed a series of challenges and has learnt its own set of lessons. From labor issues to mobility, technology and access to remote warehouses, lack of international trade, etc.
The spread of the new coronavirus, COVID-19, is being felt globally across operations in ways that are difficult to model and assess.
As globalization has increased, the world’s supply chains have become substantially more interconnected. Moreover, as emerging market economies have steadily come to account for a greater proportion of global GDP, goods often have more stages to pass through before reaching the end consumer.
From national lockdowns to closed airspace and borders, Covid-19 has placed a major strain on the world’s supply chains, including essential linkages relating to food and medicines.
For decades, low-cost supply and minimal inventory were the key tenets of supply chain management. But in an increasingly turbulent world, supply networks that are overly dependent on the lowest-cost supplier and minimal inventory levels can rapidly imperil the business. Analysis shows that companies with resilient supply chains grow faster because they can move rapidly to meet customers’ needs when market demand shifts.
Companies are now investing in supply chain resilience to minimize those risks and to benefit from improved efficiencies. Deployment of cloud-based platform, to provide real-time information on production and external demand to its supply chain control tower. Insights generated by advanced analytics help companies make right decisions quickly, it further allows the company to prepare contingency plans and relocate inventory in case of any natural disaster whereby the companies can also avoid the disruption and financial loss other companies suffered.
Companies that invest in supply chain resilience reduce product development cycles substantially, since production teams adjust faster to changes in market demand, revenue growth accelerates.
Leaders & Organizations are now exploring various changes to the existing supply chain model and new supply chain will definitely be different, some of them would be the following, which are to likely be implemented by most in order to create resilient supply chains:
- Setting up alternative manufacturing sites and assembly nodes and making the most of industry tools to optimize cost, improve visibility across the network and accelerate reaction times. Leaders develop tailored solutions for each segment of their supply chains to boost performance and cut costs. Those dependent on offshore production move some manufacturing onshore or closer to their core markets.
- Exploring cloud-based supply chain applications and collaborative platforms and tools will enhance information sharing. They also improve the quality and speed of decision making within an organization and with suppliers and other external partners in a secure environment. Amid the Covid-19 pandemic, manufacturers have demanded greater visibility into the supply chains of their suppliers—a practice worth continuing. Leaders are exploring automation and robotics to make their supply chain more autonomous and adding suppliers in their home markets to ensure business continuity.
- Exploring control tower solutions that can integrate data across the entire supply chain, and blockchain offer leadership team’s real-time visibility. In lieu of which companies can better calibrate supply with forecast demand by comparing internal production capacity data with real-time demand signals such as weather data.
- Focus on improving the ability to rapidly analyze internal data and external sources of big data. That means harnessing machine learning and artificial intelligence for predictive and prescriptive analytics. Those tools can deploy early-warning technologies, model risk scenarios and develop pre-programmed responses. Increased risk of disruption also requires updated planning parameters and objectives, since old assumptions are no longer valid.
- Empowering the teams, since decentralized teams can react quickly to insights generated by advanced analytics and create the rapid-recovery capabilities that will help companies navigate smoothly in times of disruption.
- Focus will be more on workforce/labor planning on Tier-1 supplier risk. Activating alternate sources of reframing of supply inventory policy and planning parameters.
- Alternative outbound logistics options and secure capacity are likely to be explored. Global scenario planning will be a practice which many businesses would follow.
- Securing capacity and delivery status for Tier-2 and Tier-3 suppliers, and securing allocated supplies and overtime assembly capacity where possible.
- Buying ahead to procure inventory and raw material that are in short supply in impacted areas.
- Securing future air transportation as supply and capacity becomes available, shortening what might otherwise be ocean freight-based lead times.
- Activating pre-approved parts or raw-material substitutions in places where the primary supplier is impacted but a secondary supplier is not.
- Activating product redesign or material certification resources where reliable second sources of parts or raw material are not already available.
- Performing an operational risk assessment on critical business functions.
- Accessing critical supply chain data across all tiers to properly assess the potential damage.
- Preparing to set up a temporary inventory recovery and evaluation process, where applicable, and pursue alternative sourcing strategies.
- Communicating with key supply chain stakeholders on supply volume and changes to demand volume for the next few quarters.
- Conducting scenario planning exercises to understand the operational implications, financial and non-financial.
- Exploring a move toward regional supply chains & to relocate parts of the supply chains.
The Covid-19 outbreak has exposed how vulnerable far-flung supply chains have become. What long passed for adequate flexibility is now subpar. Companies that begin investing today in a resilient supply chain will be best positioned to weather the next event that obstructs the global flow of goods.
The current crisis is an opportunity to reset a system that has relied on outdated processes. Creating smart and nimble supply chains is the key to building a global trade and investment network that’s capable of weathering future storms. Fundamentally rethinking on supply chains and thereby modifying the supply chain as a key business driver being the most important factor for an agile business to succeed.