Rethinking supply chains post Covid-19: agility is key

In a recent survey conducted by APQC, it was found that most companies missed their supply chain performance targets in 2020, which is not surprising given the massive disruptions from the Covid-19 pandemic and Brexit. Only 27% of the surveyed organisations met their customer service and inventory goals.
Covid-19 was the wake-up call. Moving forward as we come out of the pandemic, organisations should look into two main areas to build up their supply chain agility and be better prepared for the increasingly uncertain world.

Global value chains are just that: chains. They work best when the economies at every link of the chain are in harmony. Goods and services then flow unencumbered and patterns form, allowing producers to re-stock in time for demand to pick up, and de-stock at a point where demand would go down.

For perishable, or short-lived goods this process is central and a key to bringing costs down and efficiencies up. The pandemic disrupts that harmony. Ultimately, this means higher production costs and more variability in the availability of materials and unfinished goods.

While it is a fair assumption that 'eventually supply chains will sort themselves out', it is plausible that one long term effect of the pandemic may be a desire to shorten supply chains to make them more robust. Meanwhile, delivery times have lengthened to the greatest extent in recent history.

No organisation was prepared for a global level pandemic and the huge surge of demand in certain products and services. Traditional supply chains mainly were built upon a 'happy path' with few considerations on worst-case scenarios. Consequently, when the demand scale tipped over, we immediately saw chains broken and a shortage of supply.

1. Supply chain visibility

The first question organisations should ask themselves is how much visibility they have on their end-to-end supply chain. There is no agility without visibility.

Starting from raw materials, through tiers of suppliers, manufacturers, distributers, to end customers, visibility is more than just knowing where the physical goods are at a certain time. It is about consolidating data obtained throughout the whole chain to establish real-time visibility on key operational information, including source of origin, location, temperature, status, inventory level, throughput, capacity utilisation, and bottlenecks.

By creating full transparency in the supply chain, organisations can better monitor activities and be alerted by any abnormality early in the process. Actions can be taken more proactively with better collaboration between parties to mitigate negative impacts down the chain. Transparency can also help organisations along the chain to better predict supply and demand patterns and improve overall planning accuracy.

To create end-to-end supply chain visibility, incorporating technology is critical. Typically, a supply chain is composed of multiple entities. Different systems are often used for different purposes. To achieve end to end visibility, organisations within the supply chain need to work together to build the right data model and invest in building system integration capabilities to enable data flow.

Utilising technology like blockchain can also make supply chains more transparent. Blockchain technology can be harnessed to centralise supply chain data and simplify the intricate web of relationships between customer, suppliers, and other 3rd parties.

2. Supply chain adaptivity

Apart from visibility, adaptivity is another key capability organisations should focus on. How scalable is your supply chain? How quickly can you scale up/down your capacity in response to unpredicted demand surge/dive? How quickly can you adapt your supply chain to respond to changing consumer behaviour?
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Raw materials have been a bottleneck for many organisations during the pandemic. Maybe it's time for organisations to reevaluate their supply base security or even assess the feasibility of adopting different designs and materials? It may also be time to break out of the box of constraints and start to innovate.
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Most businesses with offshore supply chains have experienced extreme shipping capacity shortages in the past few months. Months of delay is no longer just a hit on financial reports but could also damage reputation. In this case, near-shore or on-shore might be the alternative to explore in your supply chain strategy.
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Suppose you have a sole-source supplier for a critical part within your supply chain and the supplier's capacity is at the limit. In that case, partnership and ecosystem investment might be an option. Or maybe it's time to reconsider the question 'Make v Buy'? Remember, how adaptive your entire supply chain can be is limited by the least adaptive link.
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For manufacturing companies, tooling and producing lead times for certain parts could be very lengthy. Production processes, once set up, can be inflexible to change. Have you or your supplier considered 3D printing as an additional manufacturing strategy?
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If you are a labour-intensive organisation and human resource is your bottleneck, technology solutions like robotics and Robotic Process Automation (RPA) can help you automate operations and significantly reduce reliance on labour.
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Outsourcing has already been utilised by many organisations as an approach to mitigate supply chain risk and increase flexibility. The global pandemic was the perfect scenario to trial how flexible these outsourcing partners’ supply chains really are. Were they able to meet your Service Level Agreement (SLA) during the pandemic? Now that we are coming out of the pandemic, it is time to evaluate whether your outsourcing partners can support your long-term agility goals.
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There is no single solution that is fit for all. What is important is that each organisation should now start to evaluate their end to end supply chain through their agility lens and re-think their strategy to enable long-term success.

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