Sales and Fulfillment
COVID-19: A wake-up call for supply chain management
Most businesses are under the impression that their supply chain management (SCM) strategies are proactive and that they will suffer the least in disaster-like situations. However, the COVID-19 outbreak has caught the entire world unawares and the response of businesses and their supply chains have been largely reactive and disorderly.
According to a survey conducted in March 2020, close to 75% of organisations reported supply disruption. What’s worse is that almost 44% of businesses lacked a strategy to deal with this kind of disruption.
The global supply chain has witnessed massive disruption in resource and revenue management and continues to grapple with the effects and implications of the pandemic.
Key reasons for global supply chain disruption during COVID-19
Let’s take a quick look at some of the leading causes for the current supply chain disruption.
- Lack of clarity: The COVID-19 pandemic has demonstrated that when a catastrophe of this magnitude strikes, both the buyers and the suppliers can suffer losses due to lack of clarity. For instance, the absence of disruption-related clauses in contracts means that the recovery times and processes weren’t spelled out clearly.
- Lack of comprehensive supply chain restructuring: Supply network mapping is an important risk management strategy, but most businesses neglect it because the process is complex, time consuming, and resource intensive.
- Arbitrary resource allotment: The lack of understanding of crucial gaps across overlapping business functions (such as procurement, logistics, and supply chain finance) can lead to an imbalance in the way costs and resources are managed. In the case of disruptive events, the objectives of the procurement function may not be necessarily aligned with those of other functions.
Takeaways from the SCM crisis
Here are some of the key takeaways from the SCM crisis:
- History repeats itself: The 2002–2004 SARS outbreak, the 9/11 attacks, the 2008 recession, tsunamis, and massive earthquakes were all key disruptive events that shook the business world and affected global supply chains. Businesses that learnt from previous outbreaks or natural disasters usually make it a point to be better prepared to handle similar crises in supply chains. The current COVID-19 crisis has indeed crippled supply chains and businesses will experience aftershocks. But the time to learn from the past is now.
- Reinventing the supply chain strategy is a must: While businesses may have invested in supply chain risk mitigation policies and strategies, the magnitude of the COVID-19 pandemic is unprecedented. It has tested the resilience and stability of supply chains world over. In the future, it might be wise for businesses to bolster their supply chains by finding multiple ways to procure, stock, distribute, and sell via digital capabilities.
- The cost versus risk conundrum: Businesses that are suffering because of relying on a single low-cost supplier may want to explore sustainable alternatives. Businesses can prepare for potential risks effectively by having multiple sources of supply that are spread out geographically and by maintaining buffer inventory.
- The aftermath of COVID-19 pandemic: Whenever things return to normalcy, COVID-19’s disruption of global supply chains will have lasting effects. Businesses may still have to face inevitable delays, inefficiencies, and demand reduction.
Nevertheless, those businesses with multiple factories in different locations, along with a diversified supplier base and the ability to absorb shocks, will recover quicker than their competitors. Many supply chains and SCM processes could be altered permanently due to the change in long-term focus necessitated by COVID-19.
How to handle supply chain disruption efficiently
- Create transparency via a command centre: Establish a centralised emergency risk management centre to control operations and address upcoming challenges.
- Nominate a single voice for the enterprise: Keep key stakeholders in the loop and allow one individual to communicate on what is happening in the organisation and the industry.
- Continue decentralised decision making: Let specialists continue making decisions at the micro level and handle their respective functions during times of crisis.
- Focus on supply chain mapping: Invest in comprehensive supply chain mapping to manage risks and create backup or alternatives for emergencies.
- Rectify inadequacies and create a recovery plan: Be proactive in managing customer demands by planning ahead and fixing existing supply chain issues.
Proactive supply chain management with Infosys BPM
Infosys BPM can support businesses’ core supply chain function with end-to-end visibility and transformational fulfillment solutions. Our unique supply chain offering lets businesses address key fulfillment challenges and reduce revenue leakage, with root-cause analysis, collaborative decision making, and resolution tracking, all from one dashboard.
Learn how businesses can exercise greater control over their supply chain, centralise key processes, optimise resources, and make proactive decisions. Explore our supply chain visibility (SCV) solution.