Published Monday 7th December 2020
COVID-19 has prompted numerous changes across all industries and has made clear just how fragile supply chains can be. The weaknesses exposed by the pandemic give an opportunity for a transformation within supply chain operations as companies take advantage of the changes.
All actors in the supply chain must proceed with a more comprehensive perspective if they want to confront future issues with resilience and preparedness. Here, we look to a post-COVID world and question how a more resilient supply chain can be created.
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The cultivation of a ‘new normal’ in a post-COVID world will heavily rely on preparing for further disruption and putting new strategies in place that mitigate the known effects of the pandemic, while also planning for future uncertainties.
Experts are wary of aftershocks caused by the pandemic’s initial effects, meaning that businesses should remain vigilant when assessing their current supply chains and the necessary changes that need to be made.
The future is still largely uncertain, and the long-term effects of the COVID-19 restrictions have not yet come into full force – businesses looking to strengthen their supply chains should take an active approach, remaining attentive to possible improvements, hidden risks and the changes that will sustain resilience.
Restructuring Supply Chains and Changing Perspective
COVID-19 has only accelerated the changes that were already beginning to take place across supply chains – albeit at a much slower pace. Strategic restructuring with the pandemic’s lessons in mind will be critical as businesses move forward.
Processes must become more streamlined for businesses to create resilient systems – this can be achieved by adopting a long-term perspective that considers immunity as the end goal. Old perspectives that were adopted in the pre-COVID landscape now need to be readjusted to move away from this financial short-sightedness.
Businesses should also aim to think more holistically. Risks should be viewed as being interconnected – not only are supply chains vulnerable but so too are entire organisations.
Another crucial element that will help build up supply chain resilience is diversification. Although the trend to opt for key suppliers has been largely beneficial in the past, a dangerous over-reliance on key suppliers in places like China was made evident at the dawn of the pandemic.
Dual-suppliers and multi-location sourcing will help businesses develop a more resilient supply chain network that will be at reduced risk. The move towards the ‘China plus one’ strategy that splits supply chain partnerships between China and another supplier shows that firms are willing to diversify, but a more localised approach may also need to be adopted.
Many companies are likely to rethink their adoption of global supply chains and turn to the benefits of more local supply chains that can have more success at ensuring operational and logistical continuity.
Experts are projecting that there will be an uptake in this trend of the localisation and decentralisation of supply chain sourcing, operations and logistics. Sourcing locally can help reduce disruption from external events that affect varying locations in different ways, ensuring that areas of the supply chain are in a more protected position.
Investing in Safety Stock
Holding any amount of safety stock to act as a cushion in times of disruption comes with the potential risks of obsolescence and ties up cash that could be funnelled elsewhere.
However, this danger must be weighed up against the possibilities of loss of revenue later down the line when another major disruption takes place.
The pre-COVID trend towards just-in-time replenishment may have to be rethought to accommodate the necessary revolution in resilience.
Automation and Technological Innovation
Taking advantage of emerging innovative solutions based on new technologies and automation will also be essential as supply chains transform.
The scope of automated processes is being broadened as supply chain actors realise how widely robots can be utilised. The safety restrictions necessitated by the pandemic has made automation even more desirable as firms will be looking to reduce the number of employees working in close proximity.
The implementation of technologies that track the entire supply chain and monitor the real-time flow of goods will allow for the collection and analysis of essential data that will help the supply chain stay ahead of trends and adapt accordingly.
With the accessibility, traceability and reliability afforded by reliable digital systems comes a more resilient and effective supply chain. Data analytics and simulation software will become ever more relevant and will be relied upon to illustrate the reality of the whole supply chain.
The Future of Supply Chains
As a restructuring of supply chain priorities takes place, an increased level of sustainability in operations and production also becomes more important. Along with new technologies and advancements, comes the opportunity to make factories and production lines more environmentally friendly.
Businesses in a post-COVID world will not only need to react to the effects of the pandemic itself but must also remain focused on larger environmental implications and issues if they want to work towards achieving long-term sustainable operations. Many firms are already beginning to think about how their processes can be redefined to reduce warehouse waste and streamline delivery chains in the name of long-term sustainability and resilience.
There is no doubt that the pandemic has exposed weaknesses across supply chains, but it has also provided an opportunity for accelerated transformation and an opening for a new perspective within supply networks. Businesses must be active in the creation of resilient supply chains to prepare for a new post-COVID landscape.
For cost reduction strategies tailored to your industry, get in touch with our expert team here at Expense Reduction Analysts and find out how we can support your business.