The massive COVID-19 related disruption that began in early 2020 has had far-ranging consequences due to the resulting impact on supply and demand. This was made evident as the global economy was forced into a recession due to drastic public health measures such as lockdowns and restrictions on the movement of people and goods. That’s not to mention the ongoing restrictions to trade, the ever-changing tastes of fickle customers, and shortages in critical medical supplies and pharmaceuticals across the globe.
Here are the top challenges global supply chains faced during these interesting times.
- Lockdowns, quarantines, and social distancing. The pandemic is challenging supply chain logistics and retailers in terms of their ability to maintain service level agreements with their stakeholders while simultaneously implementing public health measures and new compliance requirements. This includes dealing with new workplace health and safety mandates, ongoing store closures (and the need to pandemic-proof their store architectures), and temporary factory closures.
- Restricted movement of goods and services. Industries have struggled to deal with stoppages within the supply chain, which created delays, and the increasing need to reorganize shipments literally on the fly. The statistics bear this out: 86% of respondents reported longer lead times in China (up 8% over February) based on a survey conducted by the Institute for Supply Management last March, while 74% of respondents experienced longer lead times in Europe, while 34–44% of respondents reported the same for North American countries. Meanwhile, 94% of Fortune 1000 companies have reported experiencing supply chain disruptions arising from COVID-19. The solution is clear: there’s a need to implement inbound and outbound transits better to meet complex, urgent requirements arising from the current economic and political situation.
- Changing tastes in consumer behaviors. Lockdowns have led consumers worldwide to stock up on essential goods due to fears of shortages, apart from existing health and safety fears and concerns. Meanwhile, the shift towards a remote working environment has eroded purchasing power and confidence. Certain products and services have increased in demand due to the pandemic, such as essential goods like groceries, pharmaceuticals, and personal hygiene products. This has also led to some manufacturers converting their entire production line to meet the shortages and resulting demand in personal protection equipment and medical supplies.
- The emergence of the ecommerce vertical. In line with the previous challenge, perhaps the most tangible, salient change in consumer buying habits was the massive shift from brick-and-mortar store purchases towards ecommerce. Restrictions to movement, long lines, and widespread closures of stores have lowered the barriers to using ecommerce technology, driving its adoption immensely.
5 Steps to Managing the Impact of COVID-19 on Global Supply Chains
Fast forward over a year into the pandemic, and the virus remains a clear and ever-present threat. In so many words, the disruption to supply chains isn’t over by any stretch of the imagination.
The challenges that COVID-19 brought to distribution have been immeasurable. Companies have taken stock of this and taken steps to further accelerate their digital transformation by implementing technologies to meet the changing needs of every market segment.
Companies can also harness this opportunity to reset their operations to Year 0, introducing digital capabilities and more flexible operational supply chains for optimized efficiencies. This will enable them to emerge with hardened, more resilient supply chains that can handle the strain of another disruption.
Here are five essential action items to manage the impact of Coronavirus on supply chains worldwide.
- Boost visibility. Real-time visibility into operations is a requirement in these uncertain times. The implementation of strategic, real-time controls is critical to improved visibility.
- Build towards flexibility. Repurposing assets, inventory, and capacity increases flexibility to adequately and agilely scale to meet the ebbing forces of supply and demand.
- Communicate proactively. Communication lines should always be open and proactively pursued with every participant in the supply chain — workers, suppliers, carriers, and customers included.
- Be good to your core workforce. COVID-19 has brought in a host of physical health and mental wellbeing concerns for employees the world over. Supporting people’s needs as they become partners for change will be pivotal to organizational success amid disruption.
- Be innovative and responsible. There are plenty of opportunities to purposely and creatively manage customers, suppliers, and logistics networks affected by COVID-19. Companies stand to gain by examining the gaps and supporting their stakeholders as they address their concerns.
The pandemic has underscored the need to reimagine the existing conventions of traditional supply chain models through leveraging digital transformation and implementing tech-driven business initiatives to rise to the challenges of the post-pandemic landscape.
An increasing reliance on a holistic approach will help companies build adequate flexibility and adaptability to handle any new disruptions they may face. Companies should strive to create a solid framework that’s resilient to risk and disruption while keeping operations efficient.
Organizations can achieve this by leveraging technological platforms that enable in-depth analytics, end-to-end transparency, and machine learning. Business continuity and risk response are critical to maintaining BAU protocols even while navigating drastic political, economic, and health measures.
A focus on agility will be critical as constant challenges and unforeseen opportunities arise. The pandemic has pushed supply chain models and IT capability to the highest priority of boardroom discussions. There are plenty of opportunities for logistics and IT professionals to demonstrate the resilience of their systems to ensure the survival — and success — of their business and supply chains.
Ultimately, supply chain leaders aren’t powerless — by taking the right actions, they can turn disruption and complexity into meaningful, enduring, and sustainable change.