April 8, 2021

Supply chain lessons - TakeAways from Covid19

Supply chains are complex and refer to the networks between companies and suppliers to produce and distribute specific products. It refers to the steps it takes to get the product or service from its original state to the customer.The COVID-19 crisis disrupted these supply chains globally, revealing both strengths and weaknesses.

Early 2020 marked the beginning of the most intense Supply Chain disruption,when we started experiencing shortage of supply in toilet paper, hand sanitizer,food and basic household commodities due to panic buying. This was followed by shortage in medical equipment like safety masks, ventilators, surgical gowns,etc. Apart from panic buying, as the largest manufacturing country in the world- China underwent a severe lock down of millions of labor and manufacturing units; the amount of production, and import - export business were stagnated and its financial repercussion were borne by companies across the world.

Leading companies with resilient supply chains and flexible networks, moved rapidly and transformed themselves when market demand shifted. Automotive manufacturers shifted to produce ventilators and surgical equipment.Perfumeries and distilleries converted their production into making hand sanitizers and disinfectants. As healthcare system and medical suppliers faced challenges, nimble luxury goods manufacturers like Giorgio Armani, Gucci and Prada overhauled operations to churn out face masks, nonsurgical gowns and medical overalls.

Now, as some regions move past the most acute phase of the pandemic and start to plan for recovery, it is vital that we understand how these pressures affected the supply chain, and confidently navigate our way through the remainder of the pandemic or a potential second wave of Covid-19. It is incumbent on the Supply Chain community to consider what we can learn from this situation and improve the robustness of Supply Chains for a more resilient future.

What are the Supply Chain lessons we must learn from Covid-19?

  • Recognizing the importance of Supply Chain Talent

A supply chain leadership position which was considered as a tactical role before, took a decade to gain a badge of a strategic role. For years, Supply Chain has been considered as a back office carrying transnational functions like placing purchase orders, storing & shifting inventory, etc. Fast forward 20 years and Supply Chain leaders are now overseeing the full span of manufacturing activities - from sourcing raw materials to production planning to delivery and services. Supply Chains across the globe find themselves with talent issues again,especially amidst the worldwide lockdown. However, this time it’s not just a matter of sheer numbers but of shifting needs - a bigger monster. Rapid changes in supply chain activities, tools, and goals call for new skills in leadership and management.The prevailing Covid-19 pandemic has evaluated the importance and potential of Supply Chain and has put emphasis on the critical need for Supply Chain leadership at all levels for a resilient future.

  • Flexibility in Supply Chain Management

Recent changes in the environment (socio-political, changing demand, shifting needs, etc.) are the cause for increasing uncertainty and risk in the market place.In order to deal with the changing market trends, flexibility in the supply chain becomes extremely important, especially for firms in highly competitive (mature)markets whose challenges are cost reduction and optimisation, increased efficiency and customer satisfaction.Flexibility in Supply Chain Management leads to elimination of ‘single sourcing’,that is, relying on a sole supplier at all levels as opposed to multiple parties.Whenever an unforeseen circumstance such as the Coronavirus occurs and the chain of supply is disrupted, the dominant reason is disruption due to single source decisions. While single sourcing can furnish competitive advantage and low costs, having all your eggs in one basket (eg. China) exposes tremendous vulnerabilities when there is a problem.Agility and adaptability in a demand-driven Supply Chain management provides greater contingency and alternatives that can be exercised promptly when a crisis of any kind occurs.

  • Strategic Inventory Positioning

Inventory can often be one of the biggest assets in organisations, spanning multiple channels and tiers, and being the biggest determinant of cash flow and return on investment. Inventory precision and positioning involves accurate product allocation across shelves and channels, improved speed & turnaround time, safety stock evaluation and reduction of supply and demand variability.Where to put stock-keeping units to ensure they’re in the right stores or facilities, at the right time and at the lowest cost is certainly a tricky task. Hence,data-driven analysis and strategies must be utilized to ensure that inventory is optimally positioned for panic buyers or customers anxious to receive their orders. If executed properly, inventory optimisation eliminates the chances of out-of-stock products, minimizes carrying costs, increases consummation speeds and preserves gross profit margins.

  • Invest in Digital Supply Chain technologies

The Digital Supply Chain is characterized by real time, end to end electronic connectivity across your entire extended Supply Chain network. The deployment of electronic sensors and connection potentiality will lead to real time tracking of the movement of all goods throughout every aspect of the manufacturing,transportation and logistics processes that permeate any Supply Chain.Information is power and this real time information gives you all of the power you need to make instantaneous decisions in the times of crisis and enables performance management and optimisation of Supply Chains across levels.The frequency and intensity of shocks to the global economy are increasing and the companies that begin investing today in a resilient Supply Chain will be best positioned to weather the next global supply crisis.