As the world recovered from COVID-19, supply chains and business models changed drastically. The pandemic and then the U.S.-China trade war exposed supply chain network fragility, revealing risks with lean manufacturing practices and geographical dependence on particular countries. When COVID hit, very few companies were ready for the pandemic.
According to a survey, just 2% of businesses said they were prepared. Many were seriously disrupted, with over 72% reporting adverse effects. This has raised questions and concerns amongst the global supply chain leadership. What should be done to prepare for the post-pandemic world?
During COVID, production strategies, logistics frameworks, and supply chain models of firms worldwide were tested and challenged heavily, unveiling vulnerabilities at every level. Such testing of supply chains happened in unprecedented ways, from delivery delays to movement restrictions, while still trying to maintain the costs and service balance. This has pushed companies to focus on domestic production, create local jobs and near-shoring, and lessen dependence on perceived risky sources.
There is also a heavy focus and continuous investment in digital transformation and autonomous supply chains. According to 65% of surveyed supply chain executives, the pandemic pushes companies to digital transformation. The same KPMG report shows that the race is on for digital transformation and supply chain automation. By 2035, automated planning and logistics will exceed 45% of supply chains (warehouse robots and store robots, driverless trucks and forklifts, delivery drones, and completely automated supply chains).
While the supply chains aspire to transform into a new digital dimension, some on-the-ground factors remain the same. In a recession-hit market, consumers will continue to look for low prices. So, companies can not raise prices since they are going towards domestic production, which can increase the cost. The relentless pressure to maximize efficiency and use capital and manufacturing capacity wisely will continue.
Companies must strengthen supply chains without losing competitive advantage. Doing this requires companies to recognize vulnerabilities first and implement mitigation measures - several of which should have been in place before the pandemic.
The companies sitting with the data are ready to take the leap and start reaping the benefits of analytics. Advanced analytics helps organizations identify and predict problems before they become problems - rather than detecting and reacting to them when they become too late. Although under a quarter (24.4%) of organizations report utilizing this today, 9 in 10 think this presents an outstanding opportunity.
Today's sophisticated products often involve highly specialized abilities and components, so no company can manufacture everything independently. This interdependency creates risks, especially when critical components or materials originate from a single location or supplier. Companies should map the whole supply chain to identify weak links to mitigate these risks. This is possible with the help of a digital twin for your supply chain. The risk assessment then must go outside the immediate tiers.
Companies should diversify to avoid over-dependence on one source. This might entail a regional approach, production near where goods are consumed, or production spread across several locations to hedge against region-specific disruptions.
While companies alter supply chains, this is the time to upgrade processes. Innovations, including automation, continuous flow manufacturing, and additive manufacturing, boost efficiency while protecting the supply chain from interruptions. Companies can utilize advanced technologies and greener operations, whether a business is installing a new production line or shifting a current one.
The pandemic has shown that demand shocks can appear anytime, and the supply chain must react quickly to satisfy changing demand. Companies should reevaluate product, go-to-market, and supply chain processes to balance product assortment while being able to respond to changing market demands.
Pandemic disruptions have shifted the nature of supply chain management. Right now, leaders are challenged to redefine globalization across supply chains. It isn't about retreating from the global stage but thriving in this new millennium. This means leveraging global capabilities while boosting supply chain strength, agility, and resilience.
At this crucial time, businesses must think strategically and holistically about their supply chains. Companies can move from vulnerability to resilience by evaluating and controlling vulnerabilities, growing their supplier base, embracing process improvement, and reevaluating product strategies.
Holocene is at the cutting edge of change, advising companies through the post-pandemic world. Holocene allows businesses to adapt to future disruptions and become thought leaders in the brand-new global supply chain landscape focused on leveraging global capabilities and improving supply chain robustness.