Covid-19 has forced many companies and industries to rethink their global supply chain models. Companies that relied on China as the sole supplier for products and raw materials have had to think about transforming their supply chain as the disruption is expected to continue in the next few quarters in the most optimistic forecasts.
There are certain firefighting steps that industries can consider to ensure that their supply chains are not completely wrecked for the time being, by holding safety stock temporarily, relocating parts of their supply chains, or using process innovations and getting production in-house. But these will only serve as temporary solutions and will be at best, incomplete. What is really needed is to build resilience within the company for the long term.
Resilience is key
Organizations that can build resilience into their supply chains can not only survive the crisis, but also grow faster, improve customer satisfaction, cut costs, and improve cash flow significantly. Recent reports by consulting firm Bain & Co show how resilient supply chains can grow competitive advantage. Revenue growth is accelerated with a 40% – 60% decrease in the product-development cycle, lower operating, and transportation of costs, and a 20 % – 40 % increase in inventory turnover.
Technology can help companies reimagine strategies used to achieve economies of scale. The traditional strategy was to concentrate production in a few facilities. But automation and newer processing technologies can help companies source production closer home and hence reduce possible disruption. Automation has become necessary due to the social distancing measures during the pandemic and deploying it in factories will help companies recover faster. The cost of automation is going down and the investment in technology will help companies use in-house facilities more and build resilience for the long haul.
Advanced analytics to the rescue
Adopting modern technologies and using advanced analytics can be one of the optimal ways to build resilience and make companies future-proof. Bain’s research shows that companies can reduce the effects of disruption by investing in advanced analytics to improve planning and forecasting. Their research reveals how Procter & Gamble used analytics to help mitigate the disruption caused by Hurricane Sandy in 2012. The company had invested in a cloud-based platform that would provide real-time data and insights on production and demand. When the hurricane disrupted production at a factory, the company was able to use the insights generated by the platform to make informed decisions rapidly. This resulted in reducing the factory’s downtime to a mere 2 days.
Further on, P&G was able to deploy more technological tools to help it predict and reduce the damage done by another hurricane in 2017. These digital tools help generate insights which P&G then used to prepare contingency plans and preemptive measures. They were able to rapidly relocate inventory to another location before the hurricane struck. Thus, they avoided the financial losses that other companies within the same geographical area had to suffer.
The pandemic has exposed the vulnerabilities of global supply chains across large, medium, and small enterprises. Companies can use the opportunity to assess their networks and weaknesses and reimagine their supply chain with the help of technology, building strength, and resilience to any challenges the future may bring.