The global economy comprises an intricate structure of supply chains, receiving more than 100 billion tons of raw materials every year. The COVID-19 pandemic has exposed the fragility of supply chains and logistics. Countries that banked on their exports had their factories shut down, and those banked on consumption, had their shop doors closed.
Disruptive ‘New’ Normal
The disruptions in primary sectors like aviation, railway, healthcare, agriculture, and FMCG, due to the pandemic, have resulted in the shortage of vital resources. Moreover, automobile, hospitality, construction, textiles, and information technology, have also bored the brunt as they are considered the economic boosters for a country.
The automotive industry is integral to global economic growth. The pandemic regulations forced several industrial and automotive manufacturing plants to shut down, impacting Tier 1, Tier 2, and Tier 3 suppliers, along with the OEMs. The industry is facing a demand shock with a tentative recovery timeline due to shelter-in-place regulations. This calls for a fundamental change to bring in enhanced and efficient manufacturing systems and supply chains. The manufacturers are trying to overcome blind spots in their supply chains, while the suppliers try to address the demand and manufacturer production schedules. This depends on the resiliency of the supply chain and sustainable practices.
Keys to Recovery: The Expert’s Take
The ability to work in tandem with end-to-end supply chain partners will optimize the performance of the total supply chain. This is vital in rebalancing supply to demand. The pandemic is projected to hasten the structural and functional changes. As per Inkwood Research, some of the feasible steps that can be undertaken are as follows:
- Enforcing Efficient Sales and Operations Planning (S&OP) Processes
Sales and operations must bridge business goals and plans. At the same time, it should also facilitate a quick response to the shifting business conditions. Cash flow will be a crucial constraint in supply chain decisions and inventory rebuilding plans. Commercial organizations will play a vital role in transmitting customer priorities to supply chain organizations.
- Customizing a Reliable Logistics Capacity
There are speculations of the irregular flow of goods for extended periods with several regions emerging from or re-entering quarantine periods. The designated recovery organizations are readying themselves for the anticipated regional availability and demand for logistics assets. These include cargo planes, international shipping containers, freight trailers, and rail cars. The companies can create mode plans and alternative logistics routes in advance.
- Setting up a Competent & Transparent Supply Chain
A charted supply chain that encompasses its first and second-tier suppliers, final consumers, distribution channels, will be viable for identifying the expectant constriction that might hinder the capacity and flow of production. Procurement strategies will be vital in setting up resilient organizations. One of the compatible strategies is a decoupling point for evading additional inventories throughout a supply chain. Procurement managers must overlook the assessment of risk management of their suppliers for selecting and evaluating their future and current supply base.
- Managing Cash-flow
Finance functions on accounts receivable and payable. Supply-chain leaders can prioritize freeing up cash in the other parts of the value chain. Minimizing finished-goods inventory can result in significant savings. Smart fleet management can aid the companies in deferring considerable capital costs without impacting customer service. The root causes of the nonessential purchase of suppliers should be analyzed by the supply-chain leaders. They can further assuage them through prioritizing consumption-based stock and manufacturing models.
- Amplified Multi-tier Supply Network Visibility
The transparency flow of cash, information, and product across each tier of the supply chain will enable the rebound during the post-COVID-19 recovery. There is also a need to ensure adequate visibility in sales channels. Companies need to integrate digital approaches to enhance supplier network. This will further aid them in gaining access to critical material and component supply.
Supply Chain Recovery: Results Obtained so far
The healthcare supply chains have been bearing the greater brunt of it all, with the need for masks, sanitizers, PPEs, etc. skyrocketing. The shortage of PPEs and ventilators has become a growing concern with an increasing number of cases worldwide. With companies failing to meet the growing demand, the WHO recommended various strategies for optimizing the availability of PPEs through better supply chain coordination and waste minimization.
In countries like India, the healthcare supply chain is witnessing a transformation with gloves and hospital furnishing products, being made by textile and fashion industries, and sanitizers, oxygen, and cleansers provided by chemical factories.
The food industry implemented social innovations as part of their strategies to tackle and recover from COVID-19. There was a reshuffling of labor interactions in value chains to reduce shortfalls. The increased flexibility of labor sourcing and timing included the movement and safety of workers. For instance, the large chicken processors in Nigeria are providing bus services to workers to reach plants and increase the number of shifts allotting fewer workers at a time.
The diversification of the customer base through flexible marketing, with restaurants shifting to delivery from on-site service, increased consumer reach. Moreover, the introduction of technologies like contactless delivery and e-commerce have aided in sustaining social distancing measures.
- Technological Integration
The Internet of Things (IoT) can work wonders for supply chain and logistics. The connected computing devices will aid the digital and mechanical machine in generating and transferring location and condition data over networks. Cold chain integrity inspection and inventory cycle counts can be automated. The automation of repetitive work processes through artificial intelligence (AI) and robotic process automation (RPA) will be feasible.
- Fast-paced Demand Planning
A well-regulated inventory monitoring system will aid in tracking live sales and consumption data. The live inventory at warehouses and points of sale in transit for accelerating demand planning can be achieved using beacons with direct-to-cloud sensors over GSM, Sigfox, Nb-IoT, etc.
Such changes, if incorporated, will impact the performance of a supply chain positively. The primary concern is demand contraction, wherein smart supply networks can be used to influence demands.
Embracing the ‘New’ Normal
The world is gradually coming to terms with the ‘new’ normal. The recovery phase is set to witness a layered relation between supply chain decision-making processes. This calls for unmatched collaboration and coordination across markets, organizations, and the economy. A new dawn of regionalized/localized supply chains and government intervention awaits.