3 supply chain lessons learnt during COVID-19

Suddenly businesses were shut, workers were sent home, and demand disruption led to supply chain shockwaves in the aftermath of the pandemic.  A year later, things haven’t changed much despite the foray of existing and upcoming vaccines to contain the pandemic.  If anything, it is the other way around, the order and magnitude of disruptions is increasing with climate-related disasters, geopolitical crisis, and increasing public health challenges.

With the COVID-19 pandemic acting as a catalyst, supply chains across the world have been focussing on building greater resilience and agility.  A report by the Fortune magazine highlights that COVID-19-related supply chain interruptions have affected over 94 percent of Fortune 1000 organisations.  Based on insights from Accenture, let’s take a look at some of the most important supply chain lessons learned owing to the pandemic.

Emphasis on visibility

According to research by WHO , 10.5 percent of medicines supplied in poor and middle-income countries, including India, are substandard or fake, posing a major risk to patient safety and potentially leading to other health issues. Today, these problems have been further exacerbated and the need for a more robust pharma chain has become all the more important.  Overall, in the Indian context, a need to re-invent their existing supply chains in the health crisis was felt  by 64% of Indian CEOs surveyed, according to the findings by KPMG India 2020 CEO Outlook: COVID-19 Special Edition.

Unless supply-chain leaders have to end-to-end visibility at every node of the supply chain, it would be impossible for them to understand key issues and bottlenecks. There must be enough data to not only point supply chain problems but also anticipate potential supply chain fluctuations in the future. Technologies like the Internet of Things (IoT), 5G enabled supply chain control towers, sensors, and other technologies are playing a critical role in enhancing supply chain visibility today.

Configurability and adaptability

Anticipating future needs with data is only one part of the equation. Supply chain leaders must be able to rapidly tweak their supply chains to meet changing demands. During the pandemic, some companies exemplified how supply chain reconfiguration is done. According to a case study by Accenture,  as part of the Ventilator Challenge UK Consortium, Rolls-Royce aided in the production of medical ventilators in co-ordination with other companies to fulfil critical UK health service requirements.: The demand for new ventilators was unprecedented during this period.

According to an analysis by Bain, resilient supply chain help companies grow faster since they can respond quickly after anticipating demand shifts to meet customer needs.  Customer satisfaction is increased by as much as 30 percent and the perfect order rate by 20 to 40 percent.

Cost of resilience

It is an ardent belief by many top executives that once the global economy gets back to normal they should continue to operate their global supply chains with a pre-pandemic approach: Minimum inventory and low cost supply. However, such a strategy can only increase risks while sacrificing long-term sustainability.

According to Bain, when the supply of parts was cut off by multiple earthquakes in Kumamoto Japan, a global electronics firmsaw a 16 percent decline in revenue and a 66 percent decline in net income in 2016. For another prominent carmaker that depends on parts made in Thailand, the 2011 floods resulted in a 5% decline in worldwide output, or to $5 billion in missed revenues.

Companies that are successful are investing in supply chain resilience to reduce risks and enhance efficiency as well as efficacy. For instance, Procter & Gamble is leveraging a cloud-based technology to provide its supply chain control tower real-time information on production and external demand.

The road ahead

The digitization of the supply chain and connected technologies are important actors in enhancing supply chain resilience and agility without a significant downside. Striking a seamless balance between resilience, agility, and technological adoption is what will help create an effective blueprint for supply chains of the near future.