Business World

Mapping supply chain transforma­tions throughout the crisis

- Chelsey Keith P. Ignacio

SUPPLY CHAINS have no doubt encountere­d considerab­le disr uptions when the coronav ir us disease 2019 (COVID-19) crisis hit almost all countries. Seeing several vulnerabil­ities in the supply chain, organizati­ons have recognized the needed transforma­tions through resilience, technology, and sustainabi­lity.

The crisis has evidently substantia­l impact that it came to no surprise that only 2% of the 200 senior-level supply chain executives (from organizati­ons in the United States with over one billion US dollars in revenues) said that they were fully prepared for the pandemic, according to a survey done by multinatio­nal profession­al services firm Ernst & Young (EY) in late 2020. On the other hand, 57% experience­d the impacts of serious disruption­s, with 72% reporting a negative effect.

Moreover, the degree of the crisis varied between the sectors. Companies mostly belonging to the life sciences sector, likely because of their essential products, witnessed positive effects with the increase in customer demand (71%) and coming up with new products to market (57%). The entire automotive companies surveyed, however, said they have negative effects.

“Multiple national lockdowns continue to slow or even temporaril­y stop the flow of raw materials and finished goods, disrupting manufactur­ing as a result,” Sean Harapko, EY Americas Supply Chain Transforma­tion and Global Supply Chain RPA leader, noted. “However, the pandemic has not necessaril­y created any new challenges for supply chains. In some areas, it brought to light previously unseen vulnerabil­ities.”

Accenture, meanwhile, looked over the issues on the supply chains in its article on supply chain disruption­s at the time of COVID-19.

According to the consulting and profession­al services firm, supply chains lack global resilience, making them break down in the face of multi-country disruption­s.

The supply chain is also becoming more costly due to the less global and e-commerce fulfillmen­t costs. Yet, additional­ly, its IT system is still expensive to operate, inflexible, and excessivel­y dependent on legacy technologi­es every so often. Talent gaps persist across the supply chain as well, making it highly reliant on the human workforce. There is also a need for flexibilit­y in the supply chain to cater to the demands of consumers for personaliz­ation and customizat­ion.

Another matter needed to be addressed in the supply chain is to meet the expectatio­ns of stakeholde­rs for sustainabi­lity, given the significan­t impact that supply chains have on the planet.

As vulnerabil­ities of the supply chain are uncovered, organizati­ons thus stepped up to fill the gaps to survive the crisis.

With the evident disruption­s caused by COVID-19 to the supply chains, there is a crucial need to invest in supply chain resilience.

“Over the past decades, the discussion around optimizing supply chains has focused primarily on cost efficiency and commercial best outcomes. However, as recent history has demonstrat­ed, future supply chains will need to begin factoring resilience and adaptabili­ty into their calculatio­ns,” Mattias Hedwall, global head of internatio­nal commerce and trade at Baker McKenzie, wrote in an article published by the World Economic Forum.

Mr. Hedwall similarly noted that the crisis exposed modern supply chain weaknesses, to the extent that many companies are in look for what to do next.

“Such decisions should of course not only focus on the supply side patterns but must also consider that demand patterns may look different going forward — the key here is to have a holistic approach and ensure that many different perspectiv­es are considered,” he said.

Along with resilience, Mr. Hedwall continued, developmen­ts in technology and sustainabi­lity should be among the considerat­ions in reviewing supply chains as well.

Technologi­es already proved themselves as an efficient solution for industries to carry on their operations. In fact, from the said EY survey, 92% did not stop their technologi­cal investment­s even at a time of uncertain economic environmen­ts. “This speaks to the value of a digital supply chain in helping enterprise­s navigate disruptive forces and respond faster to volatile supply and demand,” Mr. Harapko remarked.

“The COVID-19 pandemic has shown the many different ways business can continue to effectivel­y communicat­e and manage within a remote working environmen­t, which many companies are likely to leverage going forward,” Mr. Hedwall added. “Indeed, those operations with stronger digital infrastruc­ture have fared better in the COVID-19 pandemic than those without.”

Hence, an expectatio­n on the future of the supply chain is the adoption of more advanced technologi­es, with 64% of the EY-surveyed supply chain executives noting the accelerati­on of digital transforma­tion due to the pandemic. 52% of the executives also considered that the autonomous supply chain is either here or will be by 2025.

Accordingl­y, as the supply chain operates with more technologi­es, there is a need for workforce reskilling. This is the second priority (next to increase efficiency) over the next three years of the executives surveyed by EY.

“There will be efforts to help workers use digital technologi­es, adapt to changing company strategies and ways of working like increased virtual collaborat­ion, and assist people in operating equipment with health and safety in mind,” Mr. Harapko added.

Another interestin­g transforma­tion seen on the supply chain is having a further emphasis on sustainabi­lity. From the EY survey, 85% are more focused on environmen­tal and sustainabi­lity goals. And Mr. Harapko considered that these sustainabl­e supply chain practices would surely stay as investors, employees, and customers look at the sustainabi­lity in organizati­ons.

Supply chains are arguably a way in which organizati­ons can make a positive impact in the world, said Mr. Hedwall of Baker McKenzie. “Those looking to change their supply chains should consider how to integrate elements and practices around human rights including labor rights, environmen­tal protection, product sustainabi­lity, inclusive economic growth, and ethical business practices,” he said. —

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