Supply Chain Fragility: What 2020 Revealed and How to Adapt

Second only to revenue, global supply chain operation has been the most seriously impacted area of business during the pandemic.
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The COVID-19 pandemic has taught the business world many lessons, including the value of low-paid (essential) workers, the need for agility and the success companies can achieve with many or even all employees working from home. Yet, none of these lessons were secrets before 2020. Savvy organizations had already been supporting essential workers, planning for worst-case scenarios, and providing work-from-home arrangements.  

Similarly, it was no secret that the supply chains companies count on to receive needed materials and products can become disrupted at any time. Yet, the pandemic brought this reality into stark relief as businesses across the globe saw deliveries of a wide range of items slow considerably or stop entirely. They, in turn, had to find alternative supply sources or do without the items that couldn’t be delivered, sometimes resulting in a sharp dip in revenue.  

Now, as the pandemic slowly recedes, many companies are taking a close look at their supply chains to see what they can do to reduce the impact of future disruptions. There is no 100% foolproof solution, but examining data, introducing new technology, and identifying alternate supply sources are a few ways companies are taking charge of this critical aspect of their operations. Here, I’ll explain this process in detail. 

Ideal Supply Chain Conditions

An ideal supply chain scenario for a company involves an agile system that allows operators to get what they need when they need it. For example, manufacturing businesses must be able to get the components they need to build their products so they can quickly respond to orders. Anything less puts them at risk of customer defection to competitors that can deliver. 

The ideal system allows such companies to switch to new suppliers when their regular ones slow or stop. A reliable and flexible supply chain is even more critical for businesses that operate on a just-in-time model to avoid the cost of unnecessary storage space and the potential for unused inventory. No backup materials or inventory means no Plan B when supply chains are disrupted. 

Another component of an ideal supply chain is the right technology, which can help operators understand the status of their shipments at any given moment and quickly identify alternatives when problems occur. Powerful analytics can give operators information much faster — sometimes even predicting issues before they happen — and in much more detail than human analysis alone. 

Supply Chain Issues 

During the pandemic, businesses had problems getting everything from toilet paper to personal protective equipment (PPE) to food to parts to build automobiles and renewable power generation equipment. In turn, their customers — other companies and consumers — suffered. 

Second only to revenue, global supply chain operation has been the most seriously impacted area of business during the pandemic. As companies have dealt with this issue, they’ve become more aware of supply chain risks than they were prior to 2020. 

Yet, rampant worker shortages due to widespread illness and the need for social distancing aren’t the only circumstances that can cause supply chain problems. Natural disasters are becoming both more frequent and more extreme, leading to supply chain disruptions lasting up to weeks at a time. Cyberattacks are another increasingly common cause of supply chain interruption. 

How to Adapt

In response to supply chain issues experienced during the pandemic, many companies are shifting their supply chain investment goals to reduce disruption. According to global consultancy Bain & Company, the current focus has shifted away from customer-centric concerns and toward things like flexibility, increased resilience, and business continuity. Part of that effort includes changing where manufacturing takes place to reduce supply chain risk. 

The goal is to create a supply chain that is able to bounce back from disruptions. The following are a few specific actions companies can take to adapt: 

  • Conduct an assessment of the current supply chain. Where are its strengths and weak points? How can the strengths be enhanced, and the weaknesses corrected or minimized? 
  • Reconsider using the cheapest option for sourcing (often China). This approach may save money now but could lead to huge losses in the event of future supply chain disruptions. 
  • Consider relocating production to areas closer to supply sources.
  • Consider new technology, such as tracking and data collection applications, analytics, and digital twins to be aware of supply chain status in real-time and to predict possible disruption. 
  • Consider new technology that includes a no-code platform so employees can implement needed changes to supply chain processes as circumstances shift. 
  • TechCrunch suggests that companies “[map] full supply chains, including distribution facilities and transportation hubs…. The goal of the mapping process should be to categorize suppliers as low, medium, or high risk and build appropriate mitigation strategies.”
  • Take the necessary time to find and evaluate new suppliers. Be sure to ask them what systems they have in place to manage disruptive events. 
  • Create and document a supply chain disruption plan and review it frequently. Have 1 or 2 additional back up plans ready as well.  

Another critical component of streamlining your supply chain is standardizing data. The following video explains why:

Organizations that conclude costly changes are needed to address supply chain concerns will have to think carefully about how to balance resiliency with the low prices customers still expect. Given that customer experience is more important than ever, it may be sensible to make critical investments and risk raising prices to avoid worse consequences in the event of disruptions down the road. 

Now Is the Perfect Time to Rethink Your Supply Chain

Rethinking your supply chain process isn’t a minor undertaking. It can be time-consuming, and now that the panic mode of the pandemic has passed, it’s the perfect period to prepare for the next challenge, whether it’s a weather event, a cyberattack, or another pandemic. 

No business operator wants to think these things could happen to their company. But as we’ve seen in recent years — not just 2020 — they can. No supply chain is completely impervious to uncontrollable events, but experts use the term “anti-fragile” to describe what companies should be aiming for: supply chain strategies that are as resilient as possible to inevitable disruptions. 

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