As the world is battling against COVID-19, the pandemic has an uneven effect on the supply chain industry. Industries such as auto, travel, consumer goods, electronics, and retail have been profoundly impacted. The supply chain economy has a large and distinct impact on economies of the world that is driven by industrial activities and innovation.
With many governments enforcing the lockdowns, manufacturers are finding it challenging to procure components for their manufacturing activities. In the time of crisis, the demand among consumers for non-essential goods has also declined. These two different spectra of the supply chain challenges are creating a crisis from both: demand and supply end of the chain.
Based on changes and constraints in demand, businesses are building new models to sustain and protect the supply chain during the current crisis. Ensuring necessary service levels across the chain, these new models are setting precedent for protecting the supply chain against any future crisis as well.
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Data Leading the Way
Having a data-centric approach towards supply chain management is making suppliers more agile in their operations. Using predictive modeling and data simulations, businesses can predict the impact of a sudden decline in demand in one country that can impact the entire supply chain. Live tracking the sales, shipments, and orders with minimum latency will help businesses to identify surge or decline in demand and these data can guide the decisions regarding the production levels.
To help organizations understand where and when to source the components, advanced machine learning algorithms can be used to determine ideal source based on past purchases, commodity pricing, agro and industrial trends, among others.
The current supply chains involve several bottlenecks where the data visibility is limited between facilities located in different locations and are in-efficient. Having a uniform data and analytics platform and sharing between different locations is crucial to managing dynamic demands. However, companies can only leverage data when the process across the supply chain is end-to-end digitized. Any gaps between the processes will increase latencies and can slow down the supply chain’s response to the changes in demand.
Having a cloud-based or web-based ordering system, allows businesses to act on shifts in demand proactively. Creating an end-to-end digital IT ecosystem is key to drive and minimize the latencies. However, to track actual production, inventory levels, and shipments, businesses must leverage various Internet of Things technologies together to bridge data between various processes.
IoTs are the sensors and devices interacting with each other’s data through cloud systems. This helps businesses monitor the machine’s performance and can indicate or predict failures to assist faster action. Starting from placing the order or query to the actual production and distribution, these various processes in the value chain funnel need to be digitized to enable faster decision making.
While manufacturers are struggling to meet quality standards due to low labor-force and demand burden, IoT devices can be used to monitor quality performances. IoT devices such as cameras and sensors can evaluate the product quality, reducing the reliability and time taken by manual quality checks. This helps suppliers to standardize the quality across different locations without slowing down production and can ensure the increasing demands are met. By enabling automation and accelerating the process, IoTs are helping suppliers to solve key supply chain problems.
Automation for Agile Supply Chain
The travel restrictions and health impact from the coronavirus have pushed organizations to operate with a limited workforce. While the manufacturers are looking for alternate vendors for their critical components, the reduced labor force and increased demand have led to increased lead time. Accelerating production and reducing manual interventions in the business processes are critical to solving these problems.
These challenges are inspiring businesses to implement Robotic Process Automation (RPA). Suppliers must develop greater automation capabilities to accelerate production and minimize manual interventions in the business process. Using IoT and robotics, businesses can fast track assembly lines, inventory management, and data analytics.
As supply chains are evolving, so does the assembly lines. As the new-age manufacturers are using 3d printing to produce their components inhouse, this reduces the dependency on suppliers. While 3d printing equipment is becoming a low cost, companies can 3d print key components that are expensive to source.
However, at the end of the supply chain funnel lies a greater challenge. Logistics of the delivery system or distribution systems have been dependent on laborers who are responsible for shipment and delivery of the end component.
Businesses like Amazon have been one of the few enterprises to experiment in using autonomous docking systems, robotics and IoT enabled drones to meet these challenges. While these automation systems may not be feasible for smaller-scale businesses, these trends are promising to close the end of the supply chain funnel in the future.
While the enterprises are adapting automation swiftly, the application of RPA has been limited to repeated and mundane processes. Suppliers across various scales and industries have been balancing between automation and digital workforce to sustain the cost of automation.
Embracing the Digital Workforce:
For manufacturers, labor shortage and replenishment serve as focal points for operations to manage ramp-up in production after temporary shutdowns. Therefore, businesses are embracing the digital work environment and communication channels to continue their operations remotely. Working from the safety of their homes helps in reducing the health risk from the workforce that the coronavirus is currently posing. Departments such as marketing, finance, and HR has moved to virtual desks.
Implementing such digital transformation requires strong training, change management, standardization of daily work, and job aids. While focusing on digital infrastructure is essential, businesses can develop a remote working culture to create a digital-ready workforce during the crisis. Processes that can be operated in a virtual environment should switch to digital, which will further help businesses to save costs. Therefore, a virtual workforce culture along with IT infrastructure is crucial to building an agile supply chain.
While these techniques act as a solution to cope with the supply chain crisis, it is the principles that are leading the decision making.
New Principles for Sustainable Supply Chain
Investing in an agile and collaborative supply planning is one of the key principles that businesses must follow. As the markets are dynamic and the spread of the virus is fast, the market situation can become extremely volatile. To deal with such an unstable business environment business must focus on investing in strategies that are agile and tools that are designed to handle such dynamics.
As the major manufacturing players are migrating their production facilities, it is easy to fall into the same habit of all fruits in one basket strategy. Diversifying the supply chain and spreading it throughout the world will not only make supply chain reliable also help businesses to optimize cost. Businesses can source components for new products from low-cost sources and can launch new products at a lower price to boost their sales.
As the supply chain has a cascading impact, it is essential to protect this crucial building block to sustain it during this global pandemic. Businesses must build resilience for the short-term impacts and the long-term impacts to rise above the COVID-19 threat. This crisis has key lessons for businesses about reliable and efficient supply chain management.
In the immediate term, organizations need to take steps to stabilize supply chain operations by conducting risk assessments and implementing business continuity plans using crisis-management teams.
Crisis Management for Short Term Impact:
To address the volatile nature of current supply chain operations, organizations should mobilize a crisis-management team or a war-room setup that has the power to make quick, analysis-based supply chain decisions.
Analysts should examine supplier delivery performance, deviations from production plans, canceled orders, customer-fulfillment rates, and other business outcomes more frequently to identify any potential supply chain issues. Besides, the crisis-management team can conduct root-cause analysis and help supply chain leadership teams to prioritize issues for resolution.
The crisis management teams will be involved in updating demand forecasts and supply plans and the focus on re-allocation of constrained supply to critical customers and orders. Data being at the center of this forecast, the teams must equip themselves with updated data and data tools. Therefore, companies with end-to-end digital processes will have the ability to live track orders, inventory, and in-production items. Based on these trackers, suppliers can take decisive measures to proactively increase production, relocate resources on key customers and orders.
Optimizing HR Strategies
While protecting supply chain businesses is paramount for economies; at the heart of this crisis, people are most affected. Protecting the people working in the supply chain ecosystem must be a priority for businesses amidst the pandemic. Drafting policies and measures that protect people against the risks of COVID-19, creates a safe working environment is critical to ensure continuous operations.
At an unprecedented time of pandemic threats, businesses must make quick decisions led by talented executives to implement new policies and standards to the ground level. Such circumstances demand organizations to focus on hiring executive talent who is efficient and can implement the changes faster and to the ground level with their team. As businesses shift towards automation and digitalization, the focus has to be on finding new executive talent for implementing strategical and analytical functions of supply chain management.
The current COVID-19 pandemic has disrupted all sectors with various degrees of impact. It is time for companies to rapidly assess, recover, and respond quickly through numerous obstacles and challenges that still stand in the way. Through the chaos of recovery, it will be very easy to overlook the root cause and gaps within a supply chain that may have paralyzed businesses during this unpredictable major event in the first place. Building towards a resilient supply chain will be at the epicenter of future discussions for years to come.
The industries constitute 37% of all jobs globally and have been a driving force for economic growth around the globe, having a cascade effect on the manufacturing industry, economy, and people. In these challenging times, a technological solution is paving the way for industries to move forward. However, these innovations must be the ones that will continue to create immense value even in the post-pandemic future. Therefore, businesses must understand the current impact of COVID-19 and its long-term cascading socio-economic effect before they rethink their supply chain.
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