SUPPLY CHAIN STRATEGIES

Taamara de Silva emphasises that the pandemic has led to many paradigm shifts

The COVID-19 pande­mic has tested the ingenuity, resilience and flexibility of global supply chains, as the prolonged partial closure of ports created a glut of containers at some locations and abject shortage in others.

Overall, supply chains have been disrupted. Rail, road and air cargo providers have struggled to move essential goods, labour shortages have become acute, and factories and warehouses are closed or face operational challenges.

Global infrastructure wasn’t designed to handle a pandemic of this magnitude. To add to the complexities, surging consumer demand bolstered by pent-up spending has created an un­precedented increase in freight charges. Supply side capacity constraints – including container ship carrying capacity and shortages, as well as congestion at ports – have complicated matters.

Substantial increases in online sales in addition to the working from home culture have also created strong dependencies on supply chains and their reliability. This presents multiple opportunities for logistics firms to revisit their business models, enter new markets and innovate their service offerings.

A McKinsey survey reveals that nearshoring of suppliers to boost supply chain resilience has resulted in increasing in­ven­­tories. However, regionalisation remains a priority for most organisations.

Since the US-China trade war, manufacturers worldwide are under greater political and competitive pressures to increase domestic production, create local employment opportunities and reduce dependence on supply chain sources that are perceived as risky.

In this turbulent scenario, the success of an organisation’s planning is strongly linked to its use of modern digital tools – especially advanced analytics. ‘Supply Chain as a Service’ (SCaaS) is an innovative ap­proach that allows businesses to generate higher ROIs by collaborating with one service partner to support all or part of their supply chain needs.

Increased visibility plays a key role with IoT devices providing valuable data on the movement of goods and their condition. For instance, temperature monitoring is currently adopted in the case of vaccines and frozen food items. The Internet of Things can also be used to improve warehouse management, fleet tracking, inventory control, and even technological and mechanical maintenance.

Meanwhile, circular economies are gaining popularity; and the related supply chain is set to encourage manufacturers and sellers to accept discarded materials, and remake or recycle them for resale.

Sustainability awareness has seen consumers leaning towards environmentally conscious companies. The largest contributors in the supply chain that negatively impact the environment are transportation, electricity and energy consumption in warehousing.

As a result, businesses are gearing up to measure their carbon footprints and reduce the environmental impact of their supply chains.

There’s a visible increase in elastic strategies as organisations work on their flexibility to expand and contracting capabilities to meet demand in a given time frame. This is achieved when businesses recognise their supply chain execution as an end-to-end process – including order entry, procurement, manufacturing, inventories, warehouse management, transportation and distribution.

AI and automation are now frequently used across supply chains. Automation is used to streamline repetitive tasks while artificial intelligence attempts to mimic its human counterpart, and can be associated with more complex and challenging tasks.

These combined technologies are extremely useful in managing assembly lines, automating storage warehouses, and tracking products and fleets across multiple geographies.

Another area for expansion is the introduction of blockchain. Digital ledgers can be shared between independent computers where supply chain participants can record all transactions relating to their raw materials, components, production processes, assemblies and so on.

This will help manufacturers, suppliers and retailers maintain transparency, while keeping track of the origin and quality of products from the source until they reach customers.

Though parcel carrying drones haven’t filled the skies yet, they’re taking on last mile deliveries, which couriers can’t do as efficiently. Similarly, companies will focus on delivering vaccines, lifesaving drugs and essential goods to remote areas across continents.

So businesses are transitioning from surviving to thriving, as they shift from managing risk and disruption o exploiting future growth.

Many organisations will continue to build on the momentum they have gained during the pandemic with decisive action to adapt supply chain footprints, modernise technologies and enhance capabilities.

The rest may resort to old methods, which will eventually leave them struggling to compete, and continue to remain vulnerable to shocks and disruptions.