Black swan event
s like Covid-19 create unprecedented challenges for the supply chains across industries. The impact of the current pandemic has been substantial both in terms of scale and speed.
Some of the disruptions have been around demand shocks, labour shortages, supplier market unpredictability, logistics unavailability etc.
For a long time, developing cost-efficient supply chains has been the focus for supply chain professionals around the globe. The current situation has forced organizations to rethink their supply chain strategy.
Building a resilient and digital supply chain is no longer a matter of choice or a source of competitive advantage, but rather a necessity for survival.
Impact on both demand and supply-side
The business challenges posed by COVID-19 have had specific supply chain implications. Organizations have started responding to these implications in a targeted manner, as some of these implications might stay with us for a long time.
COVID-19 has had a direct impact on consumer behaviour, leading to a shift in channel preferences towards digital purchases. Organizations are responding to this shift by exploring new go-to-market models like direct to consumer, leveraging e-commerce platforms and strategic tie-ups with last-mile delivery partners for contactless deliveries
Another key disruption has been around demand and supply shocks. There has been high demand and supply variability which is not only making conventional forecasting techniques and planning cycles inapplicable but also leading to inventory pile-up or stock-out across different supply chain nodes. To counter this disruption, organizations are practicing responsive fulfillment through multiple means, including rapid planning cycles (daily/weekly), demand sensing at the retailer/distributor level, and enhancing near real-time visibility across the supply chain by leveraging dynamic supply-demand balancing.
On the upstream supply chain side, supply risk has magnified owing to dynamic movement restrictions and trade wars among countries. The focus has now shifted to supply risk resilience by leveraging procurement analytics and scenario analysis.
The disruption is not, however, limited to the upstream supply chain – it is also impacting downstream operations by increasing distribution costs due to labour shortages and frequent trips to deliver short shipments. Moreover, the future of the Distribution Centre operations has become uncertain. Organizations are reframing SOPs in order to build a focus on safety measures, health screening, protective gear, etc., and ensure continuity of operations. Also, there has been an increasing trend of reassessing the distribution footprint to cater to changing demand pockets and supply hubs.
Building resilient supply chains
Organizations across the globe are changing their ways of working to survive the crisis and are adapting to the new normal by bringing in increased visibility, demand sensing, and scenario analysis. Leveraging advanced simulation techniques, implementing Demand Driven Material Requirement Planning and developing a digitally connected supply chain ecosystem are high-priority focus areas for many organizations in order to build a resilient supply chain and minimize the impact of future black swan events.
Views expressed are personal
Baljinder Singh, Associate Director – Supply Chain Transformation, PwC India also contributed to this article
