Mapping supply chain transformations throughout the crisis
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. —