Three supply chain risk management lessons learned from COVID-19
- Published: Friday, 20 August 2021 10:02
As the COVID-19 pandemic quickly spread around the world, businesses and individuals had to make quick decisions to adapt to the crisis. As the world gradually attempts to make a return to normal, there are several important supply chain lessons we can take into the post-pandemic business environment.
According to the Capgemini Research Institute, over 80 percent of organizations have reported a negative impact in their supply chain due to COVID-19; and this highlights that some of the most important lessons from the pandemic for businesses has to do with the supply chain.
Entrepreneur, investor, strategic advisor, and philanthropist Dee Agarwal spends his time looking at trends in supply chain management and considering techniques for how to minimize risk in the chain when crisis strikes.
"There is no greater example of the importance of risk management within the supply chain than what we observed this with COVID-19. What happened in our grocery stores and hospitals was not coincidental - it was a direct consequence of how a crisis controls demand and how demand controls the supply chain. If businesses have learned anything it's that we must always be prepared for crises," says Dee Agarwal.
Below are three of Dee Agarwal's most notable supply chain insights from the pandemic period:
It's not all about cost
Despite the instinct of many company leaders to operate with a lowest-cost supply framework, Dee Agarwal argues that investing in resilient supply chain methods now will actually create more long-term gains while simultaneously preparing for future risks.
"This is probably the last thing on many leaders' minds right now, especially if their business is struggling to survive, but it's crucial if we are aiming to avoid financial losses in the future. With the state of the pandemic and the market itself being so unpredictable, many companies can't afford any more disruptions, and a low-cost method doesn't take the steps to ensure that," Dee Agarwal says.
Instead, implementing a resilient and flexible structure across all operations including planning, production, shipping, and distribution will over time return supply chains to a steady state. Resilience consists of two factors: resistance and recovery - preparing for risk, and following a plan when risk strikes. Integrating resistance and recovery methods at the operational, tactical, and strategic levels can create a lasting and resilient supply chain.
Visibility is digital
Technology and digitization were already on the rise pre-COVID. However, the pandemic, lockdowns, and the need for more virtual tools and integration has advanced to include a digital option for almost every function.
"Visibility within the chain is incredibly important, especially in complex systems. Being able to see what is going where and by whom at what time is critical to ensure seamless flow. We've got a lot of technology that can help us be more precise and see things in real-time as they are happening. The more precise we can get, the quicker we will be able to respond to any disruptions along the way," Dee Agarwal says.
Cloud computing software and collaborative platforms are becoming popular among suppliers to provide speedy insights in a secure way. Other emerging technologies that are being utilized to create further visibility are control towers, augmented reality, robotics and automation, and smart mobility such as autonomous guided vehicles, or AGVs, and drones.
Despite the previous expansion of global supply networks, the pandemic exposed weaknesses in such long and lean supply chains. There is an increasing transition towards localization and near-shoring as methods to align more clearly with market-specific needs and behavior.
A survey by Capgemini indicates that 65 percent of organizations are actively investing in regionalizing and localizing their supplier base.
"We're seeing this already in Japan, and other Asian countries. Regulatory agencies are actually providing subsidies to manufacturers to move production back within home borders. It may be cheaper to outsource operations overseas, but there's much greater risk. When things are closer to home you can predict risk better, and there's less room for error, miscommunication, or lag time," says Agarwal.