How businesses can learn from pandemic supply-chain breakdowns and better prepare for shifting customer demands and disruptions
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- Most organizations utilize short-term, "just-in-time" strategies, but this method can create problems when business needs or customer demands suddenly shift, like during a pandemic.
- If companies want to survive post coronavirus, they'll need to re-examine their supply chains, develop new risk-mitigation plans, invest in technology, and focus on talent development and sustainability.
- Companies should also invest in cross-training employees and upgrading human resources policies to attract and retain top-tier talent that makes supply chains resilient.
- This article is part of a series called Risk and Resilience, which focuses on identifying some of the growing risks that companies should be aware of to help them build more resilient companies in the coming year.
Cleaning supplies, toilet paper, and certain food items were scarce during the early days of the pandemic - though it wasn't necessarily because there were shortages of these products, experts say. Rather, the empty store shelves revealed some kinks in the supply chain.
Most supply chains have traditionally focused on "just-in-time" strategies, where organizations produce only what's needed, when it's needed, said Abe Eshkenazi, CEO of the Association for Supply Chain Management (ASCM), a nonprofit association for the supply-chain industry. It's a cost-effective approach, since it eliminates the need to store excess inventory - but when demand shifts quickly or isn't accurately forecast, it creates problems.
"What we didn't prepare for and what we didn't establish the supply chains for were 'just-in-case,'" Eshkenazi said about the pandemic. "So we saw surges in consumer products. Whether they be toilet paper or consumer goods or personal protection equipment, it was clear we did not have the agility nor the responsiveness necessary to address the surge in demand."
Supply chains typically devoted to industrial or commercial industries, like restaurants, offices, or schools, were suddenly needed at the consumer level, he said. More people also began ordering products online for delivery.
Whether these behaviors continue after the pandemic is to be determined, Eshkenazi said. "We still have quite a bit to work out for supply chains on the back side of this pandemic," he added.
To survive post-pandemic, businesses must take the lessons learned from the past few months to re-examine their systems. Ramping up risk-mitigation plans, investing in technology, and focusing on talent development are some ways to make supply chains more resilient.
Re-evaluate your current supply chain and risk-mitigation strategy
In a recent survey of supply chain professionals by BluJay Solutions, a supply-chain software provider, 75% were making "moderate-to-extreme" changes in their supply-chain practices based on lessons learned from the pandemic, while 34% will make "many or extreme" changes in supply-chain design and operations. Meanwhile, nearly 60% of supply-chain professionals plan to change their risk-mitigation strategies because of the pandemic.
Developing stronger relationships with suppliers and expanding supplier bases will help companies become more agile in responding to shifts in demand and disruptions that come up. Eshkenazi suggests thinking through these questions: What do you source? Where do you manufacture? Where do you deliver, and which sectors do you support?
According to an ASCM report, companies that had less inventory and lower levels of working capital will likely come out of the pandemic ahead. Maintaining regular communication with suppliers fosters better relationships, which also keeps transaction costs down.
"We can't be surprised anymore by these types of disruptions, and more importantly, organizations are planning accordingly to try to shift their production so that they can be more regionally focused as opposed to a major production facility in one location," Eshkenazi said.
Diversify and focus on customer service and transparency
Diversifying your supply-chain strategy also helps businesses adapt to disruption. For example, organizations whose supply chains focused on the commercial sector, such as restaurants, may need to change their production to be able to also service the consumer market, based on whichever is busiest at a given time, said Steve Tracey, executive director of the Center for Supply Chain Research at the Penn State Smeal College of Business.
Most supply-chain officials believe customer experience will help differentiate their business in the coming years. Technology, including communication tools like order tracking, cloud-based shipping and ordering, and radio frequency identification (RFID) chips, enable real-time visibility into orders, shipments, and inventory, narrower timeframes, and business intelligence to optimize customer experience.
Collecting and analyzing data for the entire supply chain helps achieve better visibility and transparency within the system. Eshkenazki said this will provide early warning signs that a customer's demand has changed or another issue has occurred that may affect your supply chain.
Invest in advanced technology
Many organizations still use manual processes, Tracey said. Technology could make supply chains more efficient, and the ability to source and evaluate data to better understand current demand and make intelligent decisions about the future will be invaluable post-pandemic.
Predictive analytics technology, like artificial intelligence, is one of ASCM's recommendations for building a more resilient supply chain. In response to the pandemic, BluJay Solutions' survey found 61% of supply chain professionals plan to address their IT capabilities, including cloud systems, remote access, business intelligence, machine learning, and analytics.
According to Gartner, some of the technology trends that supply chain leaders should consider adopting to gain a competitive edge and navigate the post-pandemic world include:
- Hyperautomation to promote collaboration and remove siloed functions
- Digital supply-chain twin technology to link digital and physical worlds
- Continuous intelligence to process data much faster
- Data security to guard against cybercrimes
- Edge computing to analyze data near the point of collection
- Artificial intelligence to enhance performance
- 5G to speed up processes
- Immersive experiences, such as virtual and augmented reality, to resemble some human capabilities
Consider talent development and sustainability
Resilient supply chains depend on a talented workforce. Eshkenazi said even before the pandemic there was a shortage of qualified workers in the industry, from the entry level to senior leadership. "One of the areas that we can do a much better job on is in attracting and retaining greater diversity in our workforce and in our leadership," he added.
Cross-training employees and upgrading human resources policies are some ways organizations are addressing the issue. Workers play a key role in resiliency and risk mitigation, and they must be able to understand and analyze data and make supply-chain decisions.
Sustainability also factors in, Eshkenazi said. According to an ACSM report, that includes prioritizing your team's livelihood and the environment, working to remain economically stable, and sourcing from local suppliers, stable economies, and advanced sources that are "scalable and shiftable." Sustainability also means avoiding sources that use child labor or involve conflict or corruption.
"I don't think we can move forward with a qualified strategic priority and plan for organizations if sustainability and risk mitigation are not both addressed at the same level for organizations," Eshkenazi said.
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