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New Learnings about Supply Chains during Crisis Featured

New Learnings about Supply Chains during Crisis silhouette of child sitting behind tree during sunset

One of the leading topics of discussion that has emerged in almost every circle during the COVID-19 pandemic is the supply chain and the need to rethink this industry in general. The disruption of operations in this industry has also reiterated the need to deploy digitization and use virtual inventories. Using the approaches will encourage organizations to rethink their approach to supply chain and enhance their efficiency even during the time of difficulty as it is the case currently.

Although the pandemic has had a substantial impact on the supply chain, the need to rethink the industry was already there even before COVID-19 struck. When the US-China trade tensions rose last year, companies begun rethinking the cost of the supply chain network and the risk posed by the struggle between the two world’s biggest economies. The flexibility of networks helps companies to adjust faster when there is a problem that may stress the network. It also allows production teams to position themselves to meet the changing market demand, giving them a competitive advantage.

According to the analysis done by Bain, companies that have resilient supply chains grow faster because they can move with the changing needs of the customers when the demand in the market shifts. Flexibility increases the order rate by between 20% and 40% and raises customer satisfaction by more than 30%. Of great importance is the way flexibility in supply chain cuts costs and enhances cash flow. Leaders have also learned that disruptions can be lowered by building supply network buffers throughout the supply chain. Also, investing in advanced analytics also improves planning and accuracy in forecasting.

Over the past few months, a different chain of events has resulted in failures and losses in the supply chain industry. However, the main damage occurred when the outbreak emerged in China. The outbreak, combined with the country being the leading producer of the world’s goods, increased the problems that affected almost every country on earth. The shutdowns of factories that occurred in China caused by the virus depleted inventories, and many companies lost lots of cash as a result. The need to send workers home and limit travel reduced the efficiency of the supply chain, which is largely dependent on humans. The idea of minimizing the interaction of people and reducing travels made it hard for goods to move in the current supply chains. This became a huge challenge, even for essential goods such as medical equipment.

After learning from past mistakes and problems, companies are now investing in resilience to minimize risks and benefit from efficiency. For example, Proctor & Gamble deployed a cloud-based solution to offer real-time information about its production and external demand to its supply chain. The company’s ability to learn the areas that it can take advantage of helped it minimize the effects of Hurricane Sandy, which disrupted production at the factory in New Jersey. This factory produces more than 90% of P&G perfumes. The insights generated by the advanced analytics system helped Proctor & Gamble to make the right decisions faster and accurately. This limited the factory’s downtime to only two days. The experience from the past events allowed P&G to deploy digital tools to prepare for potential damages resulting from Hurricane Irma back in 2017. The company managed to prepare contingency plans and relocate its inventory to a safer location.

Decentralization of activities and teams can also benefit the supply chain significantly. It allows teams to respond faster to insights that are generated by advanced analytics systems and develop strategies needed for a faster recovery, that will help companies navigate times of disruption with ease.

Going by the past events and successes that have been experienced from deploying responsive strategies, companies must start investing in resilient supply chains that is in a better position to respond to unprecedented global disasters and enable movement of goods at all time.

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Scott Koegler

Scott Koegler is Executive Editor for PMG360. He is a technology writer and editor with 20+ years experience delivering high value content to readers and publishers. 

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