For more than a year supply chains have been heavily disrupted and endured stress as we have never seen. COVID-19 was the main trigger and is still a major factor this year, causing many complications and repercussions. Many factories in Asia were closed from early 2020 causing widespread product shortages that continue to linger. Logistics channels were greatly affected as the virus spread, causing further disruption. In manufacturing, the impact has led to companies reviewing their manufacturing and assembly activities and putting less reliance on just-in-time (JIT) methods and increasing inventories as well as revisiting their sources of supply. What this has highlighted is that all organizations need to fully understand the full extent of their supplier networks and their dependencies.
Supply chains continue to be disrupted by multiple global issues
By mid-2020 the COVID-19 pandemic was responsible for significant supply chain disruptions. The impact of lockdowns, human illness, factory closures, logistics network constraints and shifts in consumer buying behaviour are all still being experienced.
Worldwide, all methods of transportation were affected by COVID-19 and are still recovering. Road and rail transport has its challenges with delays and border controls, sea freight is struggling with global container shortages and air freight is using repurposed passenger planes. Global vaccine transportation is a huge, but vital, undertaking adding to logistics headaches in 2021.
Increased cross border controls
In the United Kingdom, there are delays at shipping ports due to Brexit-related issues. Some are temporary, but there are lasting effects on, for example, the food industry which is dealing with the introduction of health checks, certificates and customs declarations which are leading to the cancellation of orders. UK-based companies that distribute products manufactured in Asia into the EU suffer longer lead times and face extra tariffs.
It has been widely reported that cyber-attacks increased because of the pandemic, with fraudsters using COVID-19-related topics to create “phishing” attacks. Disruptions due to cyber-attacks/data breaches are growing. Jonathan Tan, managing director for Asia at McAfee, advises organizations to maintain an aggressive and healthy cybersecurity posture to contain risks as much as possible in the event of a potential breach.
Not all disruptions are Covid-19 related. Major weather events are growing in severity and frequency. Longer and hotter summers, freak storms, and extreme temperature changes are posing additional risks. Bushfires cost the Australian economy US$100M a year – more than 10 times that of the US. The risk to suppliers and businesses is increasing every year.
What can businesses do now?
Very few organizations have not been impacted by supply chain disruptions in 2020 and 2021 and the reverberations have caused them to review their end-to-end supply chain design and operations. Manufacturers need to increase their domestic production, reduce their dependence on sole-source and risky suppliers and maintain the levels of inventory that are necessary to avoid stock outs. Digital products almost always incorporate critical components, the availability of which can be seriously impacted by upstream shortages and transport limitations.
Supply chain mapping
The first step is to fully understand your current supply chain and map the “as is” state end-to-end. This must include all direct (Tier 1) suppliers and their upstream suppliers (Tier 2 and Tier 3), as well as distribution and transportation networks. Only with such a comprehensive end-to-end view can an organization effectively assess its supply chain, pin-point areas of risk and take action to ensure future continuity of supply and provide resilience against in the event of future disruptions.
Adopt new technologies
Digital solutions for managing supply chains are no longer a “nice to have” but a critical success factor. They actually create a competitive advantage by enabling companies to be more agile and resilient than their competitors. According to BCI’s Supply Chain Resilience Report 2020, “More organizations than ever are now using technology to assist with supply chain management and mapping: More than half (55.6%) of organizations are now using technology to help analyze and report on supply chain disruptions, with the number using technology to help with supply chain mapping seeing a major increase to 40.5% (2019: 22.6%). More than half of organizations (57.6%) report that COVID-19 has been the reason for investment in new technology and tools.
How to reduce future disruptions and make your supply chain more resilient
Realistically, supply disruptions will happen. But companies can, and need to, prepare for them.
1. Identify your vulnerabilities
Identify sole source suppliers and their own upstream suppliers and perform due diligence to assess their level of resilience and response capabilities. Many organizations carry out due diligence on key suppliers only during commercial discussions and at the contract signing stage, which is important. And, they also need to re-assess the resilience of suppliers on a regular, scheduled basis. If a supplier produces an item in only one plant or one country, disruption risks are higher. Understand how quickly key partners could either recover from a disruption or be replaced by an alternative. Diversification is key to resilience.
2. Explore technology solutions
Solutions abound for all functions from planning and procurement to transport logistics. Warehouse and transportation management systems (WMS and TMS) have changed the way supply chains are managed. Software, cloud-based solutions use artificial intelligence (AI), Internet of Things (IoT) and data analytics to automate processes and create new ways to move product. Technology makes supply chains more efficient, so they deliver greater value. Choosing the right medium-to-long term solutions depends on a company’s industry, size and supply chain complexity.
3. Break down data silos
Historically, a different team manages each of the major supply chain processes; planning, delivery and recovery. Disconnected systems and discreet technology is often used to manage each process, supported by disparate data sources, which results in a lack of end-to-end visibility. This leads to decisions being made on incomplete or inaccurate parts data, as specialists at each stage of the process focus on their own role in a part’s journey, operating somewhat independently of the adjacent upstream and downstream steps. This usually results in duplicated effort, unnecessary spending, avoidable waste, lost inventory, unnecessary cost and, worst of all, a failure to meet customer commitments and damaging those relationships. It’s clear that the traditional approaches to manufacture, acquire and provision products needs to change. And the same goes for the way that service parts and the supporting processes are managed. The obvious first step is to break down these silos and create a single-source of truth about part data so that a single, accurate, real time view the whole picture is obtained. This enables better decisions across the plan, deliver, recover lifecycle to drive cost reduction and improved end-customer satisfaction.
4. Put people first
A healthy workforce is a productive one. Being flexible about the new ways of working helps with talent retention. The loss of skills is a constant concern and talent management must be an important part of a business continuity plan.
What does 2022 and 2023 look like?
Supply chain managers should use the experiences of 2020 and 2021 to take a fresh look at their supply networks, understand their vulnerabilities, and then take the appropriate actions to improve resilience. While doing so can create competitive advantage, failing to do so is leaving an opening to the competition. While supply disruptions due to COVID-19 will reduce over time, this entire situation has made organizations more sensitive to the fact that their supply networks may contain potentially crippling risks and is propelling them to identify and remediate those potential points of risk.