The disruptions that followed as the economy shut down at the global level, exposed vulnerabilities in the production strategies and supply chains everywhere.
The pandemic revealed the vulnerable areas in the supply chains globally, all, sectors, and industries. The focus of the organisations shifted towards keeping the business afloat by salvaging the supply chains and meeting customer needs.
Customers are now willing to trade at low prices for accessibility and availability of products in the wake of the pandemic.
The top five industries that were most impacted by covid 19 are Airlines, Oil and Gas Drilling, Apparel Retail, Home, Furnishing, Retail, Casinos & Gaming. Top five industries least impacted by covid 19 are Multi-line Insurance, Life & Health Insurance, Specialized REITs, Property & Casualty Insurance, and Industrial REITs.
According to McKinsey, primarily six key issues need to be addressed across the entire supply chain to reset for the new normal.
1. Establishing a list of important components, finding the source of supply, and identifying alternate sources in multitier supply chains.
2. Calculate available inventory along the value chain, including spare parts and after-sales stock, to serve as a bridge between manufacturing and customer delivery.
3. Determine realistic final-customer demand and respond to (or, where possible, prevent) customers’ shortage-buying behaviour.
4. Improve production and distribution capacity to maintain employee safety, such as by providing personal protective equipment (PPE) and collaborating with communication teams to convey infection risk levels and work-from-home possibilities. Leaders will be able to comprehend these measures if they take them.
5. Identify and obtain logistical capacity, including predicting capacity and accelerating, when possible, as well as being flexible on transportation mode as needed.
6. Run stress tests to determine where supply-chain concerns may begin to have a financial impact on cash and net working capital.
As chaos gives rise to opportunity, the disruptions caused by covid made us aware of the pain points or weak links in the supply chain. Forcing leaders to re-think their supply chain management strategies.
One of the immediate initiatives that supply chain heads need to take is to design a resilient supply chain by identifying the key risk contributing areas and the weak links. This exercise needs to be practiced regularly.
Digitizing the supply chain management will reduce the response time and rigidity of supply risk management resulting in greater visibility and improved coordination throughout the supply chain.
Understanding the supply chain responsiveness towards the market changes helps us build a smarter supply chain by leveraging Artificial Intelligence and other technologies-IoT (internet of things), blockchain.