An array of recent events, starting with the raging global pandemic, has disrupted each and every aspect of the human existence. The companies are realizing the urgency of being resilient for a collaborative response to uncertain situations and sudden threats. The Spanish Flue, Bubonic Plague, Oil Crisis of 1978, 9/11 Attack on the USA, Tsunami of 2004, Great Recession of 2008, SARS, MERS, and many more have already plagued the human civilization. It is for sure that the list will continue in the coming years, and the pandemic Coronavirus is not the last one. Not only the supply chain, but the very core of economic, social, environmental, governmental, industrial landscape is shaken, leaving long-lasting ripple effects.
The pandemic has started to buzz since the end of 2019, and within a few months, the whole world is bending to its knees. “By the end of March, a second survey revealed 95% of companies had experienced or expected to experience disruptions in supply chains, with lead times for inputs across Asia, Europe and North America growing to at least twice as long as normal operations.” The Director of the Massachusetts Institute of Technology’s Center For Transportation and Logistics, Dr Yossi Sheffi said that the pandemic has caused problems in warehousing and transport facilities. He added that the supply chain disruptions are an inevitable consequence. Delays in delivery and transportations will occur, and the companies must be equipped to deal with such issues.
Reforming Supply Chain Strategies
The disruption in the supply chain management has started long before the advent of the global pandemic. Technological advancements have reformed the processes to more active and real-time information oriented. Machine Learning and Artificial Intelligence have made processes proactive and efficient. Cognitive technologies cushion risk assessment techniques, Blockchain Technology helps in detecting frauds in the process. The market is in a volatile condition, and no one knows what would happen next. The supply chain sector can face threats and opportunities, even if there is no pandemic or tsunami.
The business can have a competitor who is lowering transportation costs. The market landscape is dotted with risks and opportunities, accurate and prior assessment is crucial. “Blue Yonder’s Luminate platform, for example, integrates layers of a company’s historical data with critical external variables (weather and traffic patterns, pricing changes, regulatory requirements, etc.) to create an intelligent, end-to-end solution applicable to retail, manufacturing and beyond. Luminate connects demand and supply through multiple tiers of a supply chain ecosystem, providing visibility to make smarter choices around managing it.”
Supply and Manufacture Shutdowns
Since the inception of the pandemic fiasco, global relations have been severely compromised. China, the nation that grew up to be the global manufacturer, has been facing restrictions due to the pandemic outbreak. The factories and manufacturing units are shut down, international transportation is restricted. The supply chain is sailing through troubled waters. With the factory shut down, production and delivery are severely hampered. Businesses are incurring losses and predicting sluggish recovery rate. Besides COVID-19, China has also raged war against nations like India, USA. Countries are going against the global manufacturer. It is the high time that the businesses have to come up with alternate options if they want to boycott everything that is Chinese.
India has boycotted the famous Chinese app TikTok and is planning to bring forth alternate options for the masses. Chinese phone brands like Xiaomi and Oppo are being boycotted by masses. If they are against these popular Chinese brands, alternate brands must be born. International production and supply are obstructed until an unknown period of time. For example, if the supply of raw material in Indonesia is shut down, then the production line in the USA can be hampered. Consequently, the production line in India can also be adversely affected, and the result can be, you sitting in Hyderabad in India are not getting the required product. Just like a chain reaction, all the factors involved here will be affected.
What can be the solution of such unforeseen circumstances? Integrating business and efficient planning of operations can be the answer to the question. Enterprise performance management enables the companies to analyse the long-term and short-term impacts of the supply chain disruptions. Fast and strategic decisions must be taken by organizations to overcome changing consumer demands. For example, in the present situation, consumers are buying masks and health and hygiene products, more than cosmetics and apparels. The businesses must understand “what the consumer wants.”
Supply Chain and Logistics Disruption
Halted International and domestic commerce, shutdowns of shipping ports, warehouses, distribution centres etc have disrupted the movement of goods from one place to another. These disruptions were imposed on businesses by the sudden pandemic. The quarantine measures and the restricted travel have messed up the whole process. India has banned 59 Chinese apps following the deteriorating relations between the two countries. Honourable Prime Minister Narendra Modi, in a recent address to the nation, mentioned the importance of going “vocal” for “local” brands. If the consumers are investing in domestic brands, then it would help the nation to be self-dependent.
For example, the Indian brand Khadi Natural has gained much popularity within a short period of time, giving the masses an alternate option to the much expensive foreign brands. The organizations are working hard to chalk out strategies to control the transportation costs, judging the present financial conditions. The supply chain must be resilient and strong enough to survive the constant changes. The only thing that is constant is ‘change’. Following the age-old traditional supply chain management techniques will set the business towards a downhill journey.
Being able to adapt to the changing times can be achieved by the tactical and comprehensive analysis of the overall situations. Giants like Nokia and Kodak failed at the face of the Digital Revolution and the changing consumer demands. As I predicted in my earlier blog, the post COVID era will not be the same. The changing times are seeing the radical transformation in the policies, sanctions, tariffs, trade agreements etc. The businesses have to abide by the changing codes of conduct. Global trade solutions can sort out the complicated supply chain in the upcoming years.
Adjustment to the ‘New Normal’
As the companies are embracing the ‘New Normal’, they have started with the evaluation of the alternate sourcing options. Opting for the domestic manufacturers and suppliers can relieve dependency of the offshore or international producers. The new models of supply chain management will be lean and flexible, all geared up to be in sync with the changing times.
Business leaders are gauging risk aversion methods, trying to make the supply chain immune to the changing times. “In recent months, oil prices have taken a free fall. The result is a huge worldwide imbalance of supply and demand. In fact, the oil industry has run out of room to store the excess inventory. The good news – albeit not for oil producers – is that the cost of gasoline, heating fuel, and petroleum-based raw materials is plummeting. With over 6,000 materials manufactured from petroleum, there is a great opportunity to lift product profit margins by understanding the underlying costs of these raw materials.”
Companies can incur higher profit margin by incorporating cheaper transportation measures for delivering essential goods. For example, if a company is manufacturing masks and selling it on an eCommerce platform, with an added delivery cost of Rs 135, consumers will not be much interested in the product. The masks are available now at much cheaper rates, as it has become staple now. The mass is panic-stricken about the transmission of the invisible and fatal virus, hence the demand is rising.
The businesses are optimizing their supply chain from various perspectives, like cost, quality, growth potential, consumer demands, the security of supplier relationships, averting supply bottlenecks, professional ethics, and rules of the land. “Taking a Total Value Optimization (TVO) approach to risk management and integrated supply chain optimization helps business leaders increase visibility and implement accelerated measurable improvements across the global supply chain. It enables executives to quantify EBITDA improvements, together with operational and working” capital risks and opportunities, then develop a documented implementation road map for improvement.”
The business revolves around the King, that is the ‘Customer’. The customer wants masks more than lipstick. There are many apparel brands that have started manufacturing designer masks, matching the dresses and gowns. Masks are here to stay for quite some time. Judging the direction of the tide, the businesses are analyzing the market conditions, financial risks, operational costs and many other factors. The virus, unfortunately, has not come with an expiry date. Uncertainty prevails, and strategies need to be formulated accordingly.
The companies have to prepare themselves in a way so that they can remain afloat when the next wave of uncertainty hits.