Four Post COVID-19 Lessons for Supply Chain Driven Businesses

The criticality of supply chains in our world always comes to the fore when a crisis arises, and the ​​current COVID-19 pandemic is no exception. With a shrink in demand for everyday goods and services, the global economy is heading into a recession and depression that may leave us with devastating cost impacts. Already, prices to move cargo have skyrocketed due to the availability of cargo-only planes, and blank sailings for ocean routes are now the norm. Notwithstanding the current travails we face, there is no better time for businesses to rethink their supply chain approach in order to effectively improve visibility, manage inventory, and cut costs while minimizing risk, possible bullwhip effects, and shocks incurred by the current irregularity. Here are four implementations to consider:

The immense benefit of globalization today has afforded businesses the opportunity to effectively coordinate demand and supply from separate geographical locations. From raw materials delivery to production and distribution, businesses have successfully built connecting links across borders that ensure and maintain efficiency, cost control, and reduced customer waiting time, the results of which have enabled us to pick up bananas grown in Ecuador from our nearby retail store in Cyprus, and order prefabricated materials in China for assembly in the Democratic Republic of Congo.

No doubt our supply chain system has benefited from an efficient multilateral management of networks but the current pandemic and its disruptions have revealed shortfalls we must address.

Consequently, an overreliance on a global supply chain model without developing local resilience and agility can lead to a weak and incapacitated ecosystem unable to meet demand when global crisis of this proportion reoccurs. The automotive, food distribution, and medical industries have been the worst hit this time with the latter being particularly overwhelmed globally and without a local action plan in effect, firms risk shortage of critical supplies post crisis to meet everyday demand. Businesses should, therefore, look to strengthen their local ecosystems to ensure resilience, resource availability and capacity to adequately satisfy demand without compromising on performance standards in the event of future crisis.

Aside from the urgent need to fortify her local ecosystem against future shocks, the tactics and strategy regarding contingency planning for businesses should be reanalyzed. Studies reveal that relatively few companies have a detailed and tested plan lasting beyond six months in the event of a crisis and given the current outlook, a vaccine for COVID-19 is not expected till 2021. How then can businesses survive? To cushion the impact of the current crisis in the near term, procurement and production departments must apply tactics and devise plans that can enable them meet demand(essentials only if necessary).

Most global supply chains today are reliant on China’s labour and cost cutting capacity; and with her factories being shut for months, only having reopened recently, the need to create similar test scenarios of interruptions and plan accordingly arises. Scenarios that include assessing supplier locations and diversification need to be considered and reconsidered intermittently to ascertain stability while also working with local and existing suppliers to gain knowledge on stock, production and their contingency plans. In order to keep heads above water, a few companies have delved into producing only essential goods in the interim, but in the long run, a tested contingency plan and strategy against disasters, linked to cross-functional departments will reconcile supply and demand efficiently for several month cycles leading to minimal disruptions.

Alongside sufficient stockpiling, agility in production, tiered sourcing, and robust supplier relations, multi-year plans constantly reevaluated and coordinated by cross-functional teams will enable businesses not only to gain leverage in trying periods but also thrive and solidify industry presence in preparation for unanticipated shocks in the future.

The outbreak of the COVID-19 pandemic has sharply brought into focus what should matter in our world. For so long, businesses have traded environmental protection and going green for capitalist prosperity and a healthy bottom line. Whilst we should not negate the need for cost control and flexibility, the collapse of the existing system should alter our current performance benchmark on cost cuts and drive us to redesign our process with the aim of paying more attention to our environment, its needs, and yearnings. An approach that is people, planet, and profit lead is achievable with holistic collaboration amongst competitors, incentivization from regulatory authorities, and the determination to reinvent production through innovative capacity building with Eco-friendly suppliers.

A perfect example of a company practicing this is woven shirt manufacturer, ESQUEL. By making structural changes to its production and manufacturing capacity and working with local farmers to develop sustainable farming techniques through an internal project tagged “integral”, ESQUEL’s Eco-friendly investments over the past decade have successfully improved their manufacturing process, enabled them to pay farmers more and ultimately deliver environmentally friendly merchandise globally. The company currently produces over 100 million garments yearly for leading brands like Nike, Polo, and Hugo Boss, with an annual turnover of over $1.3 billion.

While moving towards sustainability may require long-term investments for companies with no assurance of reward being their main turn-off, ESQUEL’s model and financial performance prove that properly planned sustainable chains lead to improved revenues and solid bottom-line growth. As epidemiologists and Scientists predict the possible occurrence of future pandemics, the lessons learned from this will equip us to better prepare for the future with a focus on responsible procurement, green sourcing, and Eco-friendly initiatives.

There exist a lot of cross-system silos today in the supply chain process of businesses, and these can be attributed to collaboration gaps between cross-functional teams and a dependence on an age-long manual process cycle for order management and fulfillment. Despite the availability of tools to check this, the recurring bottlenecks have increasingly impacted the ability of businesses to gain value from their data owing to several blind spots and insufficient data mining. The post COVID-19 era will require heightened efficiency from businesses, and as such, internal management and control of its end-to-end process is key. Cross-functional teams and decision makers who onboard data visualization and mining tools into every facet of their organization will gain deeper insights and benefit from readily accessible data to deliver excellent customer service experience.

The usage of predictive analytics tools such as SAP, ARIBA, TABLEAU, and others avail businesses the opportunity to analyze their data for optimization and efficiency across a wide range of fulfillment spectrum such as procurement, manufacturing, logistics, and general operational capacity. Successfully measuring and utilizing gleaned data in this regard ultimately leads to a more intelligent inventory management cycle, risk mitigation, the discovery of new demographic areas as well as touch-points for customer service consolidation.

Even as the COVID-19 catastrophe is set to potentially change the way we conduct business forever, global supply chains have long needed a revamp and overhaul of their foundational structure to reflect actionable data transformation, resilience and sustainability. While this is not the disruption envisaged, its devastating effects on various economies should serve as a wake-up call and enable us be proactive for posterity.