Over the last few decades, companies have been optimizing their supply chains to lower costs, reduce inventory and maximize asset utilization. Supply chain globalization offered many benefits. It opened new markets and new sourcing options and lowered costs from suppliers. Globalization and offshore manufacturing became so common that by 2018, China accounted for around 28% of all global manufacturing output and most companies around the world had become dependent on offshore manufacturing.
As successful as globalization was for companies – increasing their revenues, margins and profitability – it also created a vulnerability that was hidden until a Black Swan event such as the global pandemic brought it to light. COVID-19 exposed some significant vulnerabilities in global supply chains that companies are still wrestling with over a year later.
The COVID-19 “Triple Whammy”
It was early 2020 when we first heard news of a novel pneumonia killing people in the Wuhan region of China, but within a couple of months, COVID-19 had spread globally and was declared a global pandemic by the World Health Organization (WHO) on March 11, 2020. In addition to its direct effect on the global population (deaths, healthcare system failures and populations lockdowns), COVID-19 also caused more than a 5% decrease in global trade, mostly due to a three-part disruption of global supply chains.
- Regional and national lockdowns as well as border closures stopped the delivery of raw materials and slowed manufacturing everywhere, but especially in China during the early days of the pandemic.
- Shipping and travel restrictions – along with work closures – disrupted logistics (road, rail, air and sea) and warehouse capacity to delay delivery times of components for assembly and finished goods.
- Significant changes in consumer demand (hand sanitizer vs. cosmetics) and spending patterns (hoarding and bulk buying) created unexpected shortages in commodity items and surpluses of luxury items.
If every country had been affected by COVID-19 at the same time and to the same degree, much of the disruption to the global supply chain could have been mitigated. However, almost every country saw different infection rates at different times, and each country responded quite differently. These differences were exacerbated as the second, third and in some places fourth waves of COVID-19 hit their populations. Altogether, these differences in timing, severity and responses around the world combined to increase the disruption to global supply chains.
Planning for a Robust, Resilient Recovery
Obviously, there was no way that any company could predict the impact of a global pandemic on their supply chain, or how long it would take to get back to normal. But smart companies took advantage of this opportunity to reevaluate their procurement policies to accelerate recovery and mitigate similar disruptions in the future. They are leveraging technology such as AI, IoT, Blockchain, AR/VR and robotics to build more robust and resilient supply chains by focusing on:
- Visibility – Tracking the location and status of all raw materials, parts, components and final products from source to destination and all points in between.
- Agility – How fast a company’s supply chain can respond to and adapt to unavoidable changes internally or externally.
- Diversification – Transitioning from linear supply chains to integrated networks of Tier 1 and Tier 2 suppliers.
- Contingency Planning – Identify risks and create policies and procedures to mitigate them if they become a reality.
It is a given that trade wars, global politics and national policies will continue to effect supply chains in the future, but many companies are taking steps to “re-shore” or “near shore” their suppliers. They are abandoning cost-focused procurement over long geographical distances because of their high risk and negative climate impact. This trend is even more important for critical supplies such as PPE, pharmaceuticals and integrated circuits.
Turning Suppliers into Partners
No matter what approach companies take to build more robust and resilient supply chains, it is necessary to build strong collaborative relationships with suppliers, co-manufacturers, customers, carriers and distributors. Companies are changing the way they deal with their suppliers from streamlining onboarding to working collaboratively to define specification, deliverables and schedules.
Supply chain management platforms make everything easier. They support real-time communication and collaboration around plans, forecasts, schedules, orders, shipments and inventories across the global supplier networks. More collaboration and a faster flow of information reduces errors and inefficiencies while gaining more visibility into supplier performance.
Learn more about how Intelex Supplier Relationship Management software can help you turn suppliers into partners.
Learn How to Improve Supply Chain Agility without Sacrificing Quality
Our upcoming webinar, “Delivering Full Circle Supplier Quality for Optimized Procurement” on June 23 at 10 am EST, examines our post-pandemic world, where many organizations now are considering more options, such as repatriation and re-shoring, to increase the agility of their supply chains. Deciding to expand or retool supplier networks brings with it a host of challenges that must be met to ensure that efficient management or onboarding of suppliers is not at the expense of quality.
Join Debra Koehler, Director, Solutions and Industry Marketing, and Fraser McArthur, Principal Product Solution Consultant, to learn where post-pandemic supplier management is headed and see a live product demonstration to help you manage a 360 supplier quality program. You will learn more about:
- Conducting on-going supplier performance evaluations
- Ensuring suppliers are compliant with certifications and documentation
- Recording supplier nonconformances and involving suppliers directly in their resolution