COVID-19: The Start of a New Era of Supply Chain Strategies|CPO INNOVATION
About 6 months ago, the world woke up to the news of the recently found risk which wound up as an around the world pandemic in no time. The faster the infection spread, the quicker the society adapted to the recently formed lifestyle. These modifications impacted directly all kinds of markets leading some to unthinkable peaks such as the pharmaceuticals, online sellers, FMCGs, Video Games, and so on
. On the other hand, industries as Air travel, Restaurants, Gyms, etc. suffered serious losses. In both cases Supply Chains suffered a lot for many various factors.
Market Players having Need Peaks
Many might question why an FMCG business who is having a big peak of demand is suffering amidst this break out when other industries are dreaming of half this need. Well, that is just 1 perspective and not the full image. When you have your supply chain optimum capacity is producing 1,000 systems of X, and unexpectedly the demand leaps to 5,000 units of X. This will leave the business 2 options, either accept only the 1,000 and leave this opportunity for other competitors or to start renting qualified production lines of stopped markets to increase capacity of production and after that face the issue of distribution by leasing more vehicles for their fleet which can be more than 4 times their existing fleet. These decisions can indeed make this company prepared for accepting this demand but will likewise raise the costs very much which will relatively increase the cost of their products which in a lot of cases contradict with the quality or buying capability of their clients and in the end the business loses.
Another situation took place in lots of countries, after the business prepares yourself to catch the brand-new market demand with read to provide fleet and all set to produce factories, they discover themselves separated with their items far from the customers due to curfew and in the end the business although loses. Some situations endured as old-fashioned business who have actually invested a great deal of money in warehouse throughout their markets, they had the ability to still reach their customers for a longer time span and stayed rewarding at the time that modern-day technique followers who minimized their fixed possessions and relied on 3PLs primarily lost.
Industry Gamers having Need Troughs
In the current situation, it is not a surprise to discover lots of industries suffering. Among the worst cases is the aviation sector. The aviation sector was stopped in a lot of nations months ago which is killing it slowly. In reality, the biggest problem is after the outbreak ends, when airline companies will be forced to use social distancing in planes for example to leave 1 seat empty in between every 2 passengers. This will cause filling the aircraft with about 50% of its guest capacity while the average breakeven point is 70%. Relatively the price of tickets will be raised a lot to adapt to the new modifications leading to fewer number of travelers. Then the second surprise begins when the maintenance costs gets greater as the spare parts transportation costs gets higher.
So once again airline companies will be entrusted to 1 alternative which is increasing ticket price again, even less passengers. In the end the optimum situation will probably be an extremely much less number of plane journeys, condensed efforts on waste removals. Might be this will make them offer more attention to their carbon radiations more as the majority of airline companies pays a great deal of offenses due to increasing carbon emissions and according to the World Resources Institute, this United Nations target was not accomplished due to inadequate progress.
Ocean Freight Expenses
Contaminate the slow-paced movement of items worldwide nowadays will leave a serious effect after the outbreak ends, we all observed the first signal which was the price of the petroleum that dropped to unfavorable about a month earlier. After the outbreak we will discover ourselves with ports filled with items that needs to urgently move. For sure the expiration rates will be really high which will flood the insurance coverage companies but that’s a story for another short article. The insane boost in the need for the ocean freight will cause huge boosts in the transport costs at the side of various parties (Shipping Line, Freight Forwarder, Port, custom-mades Clearance, etc.) On the other hand, the low-cost costs of fuel will produce brand-new routes for ships to conserve costs of passing by canals as Suez Canal & & Panama Canal. These costs will for sure cause huge raises to the cost of imported basic materials for most Supply Chains.
A New Period of Supply Chain Strategies
After all the anticipated changes we went over, I believe Supply Chain Management throughout the world will begin reassessing their techniques and most importantly the risk management teams will be an essential gamer in developing the brand-new techniques. Contingency strategies will be a need to with regular updates and much bigger spending plans. More propensity to join the online markets will be discovered as it is currently offering some substantial signs of growth worldwide.
In the end, these are all theories and this is the best time of supply chainers to show their ability in managing these global market modifications.