Covid – five years on from the near collapse of global supply chains
The Covid outbreak was the biggest disruption to global supply chains in decades– causing severe shortages for manufacturers, retailers and consumers across the world says supply chain experts INVERTO, part of Boston Consulting Group.
The initial cliff-edge shock to supply chains was followed by rolling disruption as the impact of lockdowns, for example in China, moved into their second year and severe delays at logistics hubs, like ports, became the norm.
Joy Anwuri, principal at Inverto, looks at some of the lessons learnt from the Covid crisis and what businesses still need to do to build resilience in their supply chains.
Says Joy: “Covid was traumatic for businesses, especially those with global supply chains. Corporates had created very complex supply chains without contingency planning for possible shocks to those supply chains.”
“That has all changed. Before Covid the concept of supply chain resilience was a “nice to have”, now it is now a standard boardroom agenda item. But what is still lacking amongst many companies are the governance structures that make supply chain risk into a key performance indicator that is regularly monitored.”
“There is also additional pressure to diversify supply chains for geopolitical reasons and to shorten global supply chains.”
“Many large corporates have now started to build up their network of backup suppliers that can step in if there is a crisis. However, most still can’t undertake that switch to their backup suppliers without severe disruption because of the need to qualify and approve those backup suppliers.”
“That delay in switching to a backup supplier and having that backup supplier deliver to the right quality needs to come down from months to just weeks or days.”
“Creating supply chain resilience also means diversifying your supply chain across geographies – making sure that you have suppliers on different continents so as to mitigate geopolitical risks. One of the major attractions of nearshoring is that it helps create a supply chain that is much more resilient to geopolitical risks.”
What are the next steps in improving supply chain resilience?
Joy says that the areas in which business need to do more work to improve supply chain resilience include:
• Using AI and other technology to create transparency within the supply chains and to undertake real time risk monitoring of supply chains. Technology can be a key enabler for introducing more visibility and to understand where supply chains are exposed to any risk but few companies make use of it
• More scenario planning including modelling the economics of supply chain disruption
• Planning how supply chains can be altered in order to avoid tariff increases
• Upskilling of category managers who are responsible for managing suppliers so that they properly understand: what are the risks in their supply chain, what measures and actions they can take to truly mitigate risk and the foresight to anticipate those risks