COVID-19 Impact on Supply Chains
The pandemic has challenged supply chains worldwide. In the latest ViewPoint survey Competitive advantage through supply chain resilience, over half of the companies say that COVID-19 have caused supply chain disruptions. As the pandemic changes demand patterns, its impact on industries and geographies varies. Manufacturing-based companies suffer from lack of demand, while food and ICT service companies are challenged with over demand, for example.
Tough times require tailored tactics. Finding themselves in an unprecedented situation caused by an unpredictable virus, the best means to tackle the challenge is to start from a mature supply chain management approach. Many companies indicate having a mature approach already, while a fair share report that the pandemic has prompted improved levels.
However, the primary risk companies battle is not only the pandemic itself but inherent supply chain risks which are now amplified by an unprecedented situation. Top of mind are manpower and competence, market volatility, and product quality and safety.
Spreading the Risks
The most frequent actions deployed focus around communication and monitoring, but primarily targeting direct suppliers (tier 1). A recommended practice is to know your suppliers, set priorities, and increase communication and collaboration. While a structured approach seems to be applied, there seems to be a considerable need for a lot of companies to penetrate deeper in order to truly know the suppliers upon which they rely.
Beyond working with existing suppliers, companies do deploy actions that could be intending to spread the risks. Such actions primarily focus on expanding and diversifying the supplier base (33%), but also include replacements (19%) and termination of high-risk suppliers (16.7%) in addition to in-sourcing (15.4%). Whether the pandemic will fuel experts’ predictions that there will be a rise in “reshoring” remains to be seen, but the pandemic has certainly exposed supply chain vulnerabilities.
Ensuring Supply Chain Continuity
As many as 2 in 3 have felt the need to address supply chain continuity. The far reach of the pandemic demands a flexible and collaborative approach. Companies benefit from dialogue and working with suppliers to reach pragmatic solutions and continue business.
COVID-19 has put constraints on how companies can continue to qualify suppliers too. Lockdowns have forced reductions in onsite audits. To compensate companies have increased remote auditing and document-based qualification of suppliers with double-digits. There is still a gap left by the decrease in onsite audits. Thus, it is encouraging to see companies increasingly look to digital solutions to augment supply chain efforts.
Strategic Changes Driven by COVID-19
Companies do seem to realize the need for adjusting their strategic approaches. The change indicated by most companies (57%) is to pursue alternative suppliers (back-up & diversification), followed by digitalization and stock management practices.
Amidst all this, it is uplifting to see that a large share of companies considers a more sustainable supply chain to be more resilient, as well. Companies are moving on the topic are first and foremost requiring sustainability information from suppliers or engaging in dialogues to build a shared understanding.
The lasting changes the pandemic will leave on supply chains and how to manage them remains to be seen. What seems to be certain is that the pandemic will continue to disrupt and influence supply chains for a long time still. Companies who manage to use the crisis to improve and innovate will build resilience and persevere.
The survey has analysed the 120 companies (10% of general sample) who demonstrate the most mature, comprehensive and agile supply chain management approach. While having a more pronounced mature approach covering the entire supplier base, leaders report that their supply chains are impacted equally if not even more than the average sample. They do seem to have a clear strategy of taking action to spread the risk while working in a structured, flexible and agile way. Primary actions seem to focus on finding solutions for existing suppliers and diversifying their supplier base. Not surprisingly a high number of leaders find sustainable supply chains to be more resilient and are moving at higher rates to work with their suppliers on the issue.