COVID-19 Disruption: An Opportunity – Supply Chain Risk Management | CPO INNOVATION
The impact of COVID-19 and its spread is felt globally across businesses & human life, in multiple ways that are difficult to model and assess. The affected regions, globally, are indeed HUB of many Global Supply Chains.
All global manufacturers are managing their businesses through various disruptions have structured their own responses to the current challenge. Long-lasting impact on many organizations across many industries seems inevitable across size, segment & geography.
In the short term, influence lies mainly in the areas of Demand Compression – Supply Chain and Logistics – difficulty in recovering Build Plans. The magnitude of these disruptions is directly proportional to the time required to recover and the industry will be far more significantly impacted, needless to say, human life as well. The costs may increase temporarily, originating from premium and expedited freight costs, extra work pay but crashing world economy will accelerate demand compression and slowdown looms large.
In the long term, organizations are also working through alternative strategies. Extremely important to challenge the current supply scenarios and evaluate what these mean for business and its impact. In the long term, the industry should get back on track but with new norms for business operation setting new rules of the game.
Rise to the Challenge – The Pandemic
While COVID-19 may act as the catalyst for companies to revisit their global supply chain strategy and accelerate the adoption of well-networked digital platforms to model capabilities & risk, short-term actions need to be made to respond to the immediate challenges.
Even the most efficient business organizations have reported impeded or entirely shut down production due to supply chain links within COVID-19 affected areas. Clearly, value chain disruption ranges on the scale of predictability. However, every disruption is an opportunity to revamp business continuity plans and supply chain processes in order to ensure the sound continuity of business lines across the world.
Connected & data-backed considerations on the criticality of the well-knit interwoven fabric of supply chain, along with the scope of due diligence to further deep-dive risk, business organizations can start building the foundation for a dynamic yet agile supply chain to counteract possible disruption for future.
Building Resilience: Business Supply Chains
The pandemic is an unfolding story, with organizations of varying segments providing mixed messaging in terms of continued production, while most consumers have no idea what the implications may or may not be in the coming days, weeks, and months.
Some business organizations are better prepared to mitigate the risk. They have:
Some business organizations are better prepared to respond to this event. They have:
Supply chain disruption caused by the spread of COVID-19 has clearly highlighted the reactive nature of business continuity plans. How can organizations ensure they are better prepared for future challenges?
Knowing supply chain starts with knowing where they are located, what disruption risks are most likely to occur, how the government will react, and be ready to activate alternative suppliers at a moment’s notice.
1. Business continuity plans
Supply chain disruption including Pandemics – Challenge the Fabric, this may need dismantling & rebuilding for Strong Future – worth taking the pain today!
2. Alternative Logistics
Both for raw material & finished goods to markets, inbound and outbound. A pre-defined response plan for eventuality will enhance the capability to respond quickly and capacity planning if need be.
3. Digital Dexterity
The traditional view of a linear supply chain and optimizing for business is transforming into digital supply networks and are well connected to enable end-to-end visibility, collaboration, responsiveness, agility, and optimization. Increasingly, these digital supply networks are being built and designed to anticipate disruptions and reconfigure themselves appropriately to mitigate their respective impacts.
4. Rebound Strategy – A Differentiator
Companies which are able to move more quickly than their competitors may be able to capture a larger share of the pent up demand, solidify their relationships with their most important customers, and perhaps gain some new ones. Pricing strategy will be an important consideration as business gradually transitions back to normal – both to address normal supply-demand considerations, as well as to maintain profitability while logistics costs, and potentially other costs, will likely be volatile.
5. Organization Readiness: Skill up
COVID-19 is the Industry Reset. Agility and resilience can be built into an organization fabric & ecosystem only if the teams building the organization, are getting ready for it. Data Analytics, business continuity planning, risk mitigation and global scenario planning skills will lead the future transition to leadership roles.
Consumer demands & leading business competitiveness over the years led to highly sophisticated supply chains for many organizations. Inter-woven & inter-dependent global nature also makes them increasingly vulnerable to a range of risks, with more potential points of failure and less margin of error for absorbing delays and disruptions.
Whether it’s a “black swan” type event like COVID-19, a trade war, an act of war or terrorism, regulatory change, labour dispute, a spike in demand for a particular product in a specific region or supplier bankruptcy, business organizations are learning to count on the unexpected.
New supply chain technologies are emerging that can dramatically improve visibility across the value chain and enhance agility and build resilience without the traditional “overhead” associated with risk management techniques. The digital footprint should be integral to the business strategy formulation.
The key to building a “Resilient Supply Chain” is to layout a strong, thought through, well-knit, value-based footprint. Uncover the risks associated to build the proactive mitigation plan and prepare the organization to rebound quickly and recover from any unanticipated disruptions that occur.