Outside of China, much of the world first experienced the COVID-19 crisis in the form of product shortages and "out of stocks," which resulted from the unprecedented disruptions in global supply chains.
Even after a year of disruption and change, supply chains have yet to fully recover. Raw material shortages continue to exist in certain markets, and transportation costs have skyrocketed. Critical components, like semiconductors, remain in short supply. Adding to these supply challenges is the continued volatility of consumer demand, and the difficulty of accurately predicting this demand.
Last year, we introduced a framework for stakeholder management in a COVID-19 disrupted world, which is outlined in the graph below, and are publishing a series of articles related to the ongoing challenges of managing these stakeholders in the current environment.
In this fourth article in that series, we examine the unique problems impacting supply chains around the world and suggest some questions to ask regarding your supply chain to make it more resilient.
The recession associated with the COVID-19 crisis has been unprecedented. Economic recovery remains hesitant, and unemployment is still higher than before the pandemic. Despite this, consumer spending has remained robust across a broad array of products, supported in many cases by state aid. How and where consumers are spending their money has been shifting, driven both by social distancing restrictions and by concerns over health and finances.
All of this has increased the challenges of accurately predicting consumer demand. And as uncertainty continues over the timing of vaccine rollouts, new variants, and the pace of economic recovery, this volatility is likely to continue for some time.
Even once the pandemic is behind us, disruptions will endure. Incorporating lessons learned from COVID-19 is critical to be better prepared for future world events.
In continuing to manage through the current crisis and preparing for the future, below are critical questions you should be addressing within your supply chain:
- Location: How can supply chains be further shortened? How can you diversify your supply base to reduce risk of potential disruptive events? What processes can be shifted, and can suppliers train workforce to handle more complex manufacturing?
- Cost: Are the right products being made with the right sourcing footprint in terms of total costs? Have you optimized the supply base? Are you minimizing total costs while keeping supply chains agile and product supply secure? What costs can be passed along to consumers?
- Technology: Are the right technologies being leveraged to enhance speed and process efficiency? Can you more effectively utilize technology to make the manufacturing processes more efficient? What early warning systems can be put in place to better predict and mitigate supply issues?
- Agility: With consumer demand shifting due to social distancing restrictions and concerns over health and finances, is the supply chain agile enough to respond to changing consumer demands quickly? Do you have good visibility and control on inventory to avoid excessive inventory when demand decreases? Can product development timelines be shortened to quickly respond to new customer needs?
- Collaboration: How can you work with suppliers to ensure delivery of the highest-value products? Can you select and work with strategic suppliers to drive cost reduction, secure supply, and foster longer-term relationships to collaborate? Can products be designed to use critical parts from different suppliers to avoid bottlenecks in the future?
COVID-19 has created unique challenges for global supply chains. Unfortunately, even after the current crisis is past, disruption is here to stay. Now is the time to make long-term decisions to mitigate risks in your supply chain and ensure greater resiliency into the future.