Published Wednesday 8th December 2021
The pandemic brought supply chains into the public eye in a way we have never seen before. With manufacturing operations and the flow of goods being disrupted, existing supply chain weaknesses became more profound.
Over the past two years or so, organisations have had to radically rethink their supply chain strategies and processes to adapt to the COVID-19 landscape. In a 2020 McKinsey study, 93% of supply chain executives stated they intended to transform their supply chains, increasing agility and resilience for the future.
But just how have supply chains changed in the year following the initial impact of the pandemic, and have companies been successful in their quest for resiliency?
How Has the Pandemic Impacted Supply Chains?
No sector has been left untouched by the effects of the global pandemic. However, with online demand increasing exponentially in recent years, supply chain volatility was an issue that needed addressing before the advent of COVID.
The problems posed by COVID-19 and Brexit have served to accelerate the changes of the past years.
However, because of the restrictions posed by the pandemic, companies have also had to contend with:
- Fluctuating levels of demand and supply
- Travel restrictions
- Reduced workforce because of illness and quarantine
- Halts to manufacturing
How have organisations responded to these issues, and what kind of long-term changes have been implemented since COVID-19?
Changes to Inventory
Just-in-time supply chain processes have served companies well for decades, allowing them to adapt to changing demand and remain nimble. However, the weaknesses of this approach were exposed as the pandemic saw rapid changes in supply and demand, with many organisations failing to meet demand due to a lack of stock.
According to McKinsey, 92% of those surveyed made moves to make physical changes to their supply chain footprint, with 42% increasing inventory along the supply chain in the past year.
Other physical changes include the diversification of the supply chain through localising and regionalising networks.
While 38% highlighted this as a priority, only 25% made changes to regionalise the supply chain in 2021. Despite this seeming lack of follow-through, future regionalisation does remain essential, with 90% of participants expecting to enact some kind of regionalisation over the next three years.
Stronger Risk Management Processes
One of the major conversations surrounding supply chain issues is risk management. Many organisations were left woefully unprepared to deal with the impact of the pandemic because they did not have effective risk management strategies in place.
While software tools and the implementation of new practices have done some of the legwork when it comes to understanding areas of weakness, there are still changes that need to be made when assessing the risks of second and third-tier suppliers.
Analytics & Digital Planning Tools
The use of advanced analytics has also become more prevalent and, for many, is instrumental to the success of decision-making processes along the supply chain.
Along with giving an accurate view of the supply chain in real-time, analytics have also been used to smooth the transition to remote working as digital tools help improve visibility and give an accurate view of supply chain performance.
McKinsey’s study found that 71% of companies who reported struggling during the COVID crisis are now beginning to increase their use of advanced analytics.
Digitisation & Automation
Along with digital changes on the organisational level, changes are also being made to digitise other elements, providing a connected end-to-end supply chain.
Digitisation is making its way into all areas, including planning, procurement, manufacturing, and logistics, to ensure the most effective decisions are being made and weaknesses can be highlighted early.
Organisations must keep this forward momentum and continue to invest in new technologies like automation and AI for warehouses if they hope to gain higher levels of efficiency and resiliency.
Reskilling Supply Chain Workers
As digitalisation becomes more important, companies are beginning to make reskilling their employees a priority. Lack of digital talent is a significant hindrance to many organisations’ ability to effectively implement technological changes.
Thus, training workers to use and interpret digital technologies is essential. Just 1% of those surveyed report having sufficient digital talent in 2021, so reskilling is something we can expect to see becoming even more of a priority.
Sustainable Supply Chains
With an opportunity to build back better than before, many companies are taking this chance to tackle their sustainability goals.
Sustainable supply chains have never been more relevant as both shareholders and consumers want to see proof of meaningful change and the development of more environmentally-friendly practices.
By making operations more efficient, productivity also increases, allowing for a leaner, more effective supply chain that is potentially less exposed to risk.
While some key changes have been made to the supply chain since the beginning of the pandemic, there is still much that can be done to address the vulnerabilities that have been exposed.
Supply shortages and logistical limits continue to cause problems despite the radical actions and changes that supply chain executives have made over recent months. Progress may have been slower than expected, but it is still progress nonetheless, with long-lasting transformations to the supply chain taking root.
Our team at Expense Reduction Analysts have supported countless businesses as they strive to adapt to the ongoing problems caused by the pandemic. To find out how we could help your organisation, please get in touch.