The year 2020 has been quite a year for global businesses and particularly for supply chains.
Just within the primary six months of the year, the world has already witnessed some defining moments, including looming trade wars between the U.S. and China, preparations for the post-Brexit economy within the Eurozone, and an increasing concentrate on sustainability and environmental consciousness. Though one can argue that none of these moments took the world all of sudden, they did push global supply chains to review and reengineer their operating models.
However, none of these events have had as big a control as has the planet pandemic we all know as COVID-19. Where the other events affected certain geographies over others, COVID swept across the world knowing no boundaries and borders. This meant that every node in global supply chains was simultaneously being challenged, exposing any vulnerabilities for flexibility and resilience.
As a results of the continuing crisis, global GDP for 2020 is predicted to average near 0%, which could be a faster contraction vs the 2008 crisis. However, variety of the toughest hit sectors like manufacturing are expected to have a sharp rebound in 2021, because the demand and supply recovers.
Though most of the research available is based on economic models, lots may additionally be inferred by assessing the complexity of supply chains. it'll be argued that the length of supply chains includes a substantial effect on the ability of a sector to be resilient to any such shocks to the system. it's also easier for shorter supply chains to recover faster, as there are fewer moving parts and environmental complexities.
This may well sway be the first truly global catastrophe for a few hundred years now, but research suggests that this certainly may not be the last. However, one can definitely use this “shock” as an opportunity to review assumptions and operating models which run our global supply chains. This global event has also highlighted the importance of risk management and continuity planning everywhere again.
What Should Companies Start Doing?
Though most of COVID’s effects is seen as inevitable, the overall impact could definitely are softened by being proactive and better prepared. In our experience, the following five steps can prepare companies to raised deal with similar situations:
1. Know your supply chain. CIPS reported in 2016 that only 4% of companies actually know their Tier 2 and Tier 3 suppliers. this case hasn’t improved over the last four years and poses a key risk to provide chains. it's important to map process, information and cash flows to appreciate an end-to-end view of your supply chain.
2. Go digital to be more proactive. Though knowing your supply chain gives you the right level of visibility, it's also important to possess internal systems to hurry up information flows. this is often often often ready to help implement any fall-back plans as quickly as possible and permit firms invaluable days to want any corrective actions.
3. Look beyond cost competitiveness. Commercial costs will always form a really important part of the provision chain equation; however, it's important to consider other elements like continuity, operational complexities, resilience and sustainability to totally appreciate the important cost of your supply chain.
4. Rejuvenate business continuity planning. Companies generally revisit their business continuity plans every 4-5 years. Though this might are good some decades ago, when the demand and supply weren't very volatile, in today’s scenario it'll be considered suicidal. it's vital to continuously monitor and plan for business continuity in today’s working environment.
5. Bring down functional walls. Last but definitely not least, it's vital to bring down those functional silos and let the organization operate together value system. variety of the more successful firms during the times of crisis, like Amazon and Dutch retail giant Spar, are known for his or her operations supported their multiple supply chains, rather than the alternative way around.
How to Survive Another Lockdown
Over the last three months, lockdowns are seen as a decent because of pander to the COVID-19 crisis. Despite a varied degree of success, this delay strategy has had its positives and negatives for various sectors. But with a second (and third in some countries) lockdown being talked about, how can companies prepare better and reduce disruption to their operations?
Our research suggests a three-step approach to cater to the current situation:
● Instill confidence in employees, customers, suppliers and stakeholders. With safety taking a paramount position in everyone’s minds, companies must assure their employees and customers that it's safe to regulate and shop within the corporate premises or avail services remotely. They also must review their business plans and relay realistic messages to their suppliers and stakeholders, so on instill confidence across their operations. Given the volatility of matters, this messaging cannot be one-off and might should be reviewed on a timely basis to remain people informed any changes.
● Review operations for nimbleness. it's vital for companies to elongate a detailed relaunch map, updating all parties involved of their responsibilities and why it's safe to relaunch. this might also include plans for any short-term speed breakers, with the correct people involved who can quickly review plans if needed. Further work are required to revive demand and reboot operations, with an exhaustive look out for any signals and red flags.
● Reshape strategy to require care of business continuity and build resilience. While the cautious approach discussed within the primary two steps is also a good start, it's vital to start investing in building resilience and continuity within the system. However, this will be often impossible until and unless firms are ready to know their supply chains similar to the rear of their hands.
Once firms achieve an honest understanding of all the flows, relationships and data within the system, it's important to hold out a full risk review from an end to finish supply chain view.
it's also important to regularly assay the operations not only from a poster cost perspective, but from an operational stability and demand fulfilment view.
it's going to be an honest idea to involve a dynamic group of your customers and suppliers during this exercise, so on gather an unbiased view to your resilience. Last but not least, it's important to take a position in a very scenario modeling tool which will allow you to assess your supply chain dynamically and to plan better.
The New Normal The new normal is perhaps the foremost overused term in relevancy COVID-19, and rightly so. Not only is that the pandemic resulting in changes within the working environment, but it’s also influencing planning mechanisms, with supply chains not left untouched.
While the COVID-19 crisis is probably going to accelerate fundamental and structural changes that were inevitable, we will expect to determine some additional changes evolving from changes in consumer behavior and a necessity to make more resilient supply chains.
But it's important for companies to completely assess the impact of any such changes on their end-to-end supply chains.
from both cost and benefit lenses. If the primary six months of this year were a rollercoaster of a ride, one cannot expect the subsequent six months to mellow down much.
Having said that, the following few months are visiting see some very interesting changes and will well pave the way for the subsequent innovate supply chain development.
Regards;
Kareem Soliman
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