As the coronavirus disrupts every walk of life, how are supply chains going to rebuild their resilience and improve risk mitigation in the future?
The relentless nature of the COVID-19 pandemic has caused unprecedented chaos. In every sense, life has been upended. Organizations have rushed to protect employees and customers while still having some semblance of business continuity.
Hardly any sectors have escaped from some form of suffering, but alongside retail and hospitality, supply chains have borne the brunt of the disruption. From the initial outbreaks shutting down many of the source locations in the Far East to public behavior at destinations (particularly panic buying), sustained pressure on both ends of logistics networks has made it hard for many to function properly. The result? Bare shelves and empty warehouses highlighting just how tightly wound global supply chains have become.
But surely in today’s world of optimization and digitalization, of efficient processes and data, tried and tested logistics systems should be capable of running regardless of what is thrown at them. So, what has happened to disrupt the invisible networks that keep modern life going?
The 300-year-old supply chain disrupted by the coronavirus
The issue is that, despite the recent wave of digital transformation within the industry, supply chains are effectively modeled on 200 or 300-year-old processes. Many of the tools and systems used are little different from their counterparts in the age of sail. If one were to give a modern Bill of Lading to a merchant from the 18th Century, it’s likely they would be able to grasp its meaning relatively quickly.
So, when businesses talk about optimizing their supply chains or logistics, what they’re really doing is squeezing the last few percentages out of an already creaking machine. It’s a bit like redeveloping a historic building. While you can improve it internally with new wiring and modern appliances, its foundations are still going to be the wooden posts it was originally built on. At some point, a decision needs to be made – either you undertake major remediation works, or the next piece of work might bring the whole house crashing down.
To look at it another way – in order to meet customer expectations of Just-in-Time deliveries, lean warehouse operations and, fundamentally, low-cost sourcing and logistics, supply chains have been honed and stripped back until even the slightest jolt could upset them.
Coronavirus is a bit more than a slight jolt. It has shaken supply chain resilience to its core. In such a situation, it’s little wonder that supply chains have suffered and, in many cases, effectively collapsed.
Managing the coronavirus effects on supply chains
In order to identify a solution, it’s first important to realize that there is no short-term answer. As highlighted previously, the pressure at both ends of the chain has broken it. Life will only get back to something resembling normality when that pressure recedes.
What’s also critical to understand is that the fix, which is at best a medium-term solution, is not one for the supply chain specifically; rather, it is aimed at remedying a business problem.
Put simply, at the heart of today’s situation is the lack of redundancy in most supply chains. As businesses have strived to keep costs as low as possible, to offer as near to free shipping as they can, they have removed any slack in their logistics.
The result is that most companies have limited locations they source from, predominantly based in South-East Asia and, more specifically, China. This is where the initial source of pressure comes from. While the next great global disruptor may not be in the same location, the principle remains the same – if supply chains have only a single location from which they source from, they automatically become tied to the circumstances of that location. Flash floods, droughts, adverse weather, local political uncertainty – by being wedded to one point of source, supply chains will always be influenced by whatever happens in that region.
The reality is that the post-COVID-19 world will require that businesses cannot single-source anymore. In order to improve risk mitigation and avoid repeats of the issues we’ve seen in the last few weeks, redundancy and alternative options will have to become a feature of most supply chains.
Rebuilding resilience and mitigating in post-COVID-19 supply chains
Making that shift won’t be easy. Plugging in an additional location to an existing network, no matter how much it is struggling, is not a straightforward process. Even as supply chains have become leaner, the complexity of global logistics means adding new sources is an exercise in integrating more suppliers, more providers, into an established system.
In order to make it work, businesses will need greater visibility of every aspect of their supply chains. That means data, and more importantly the ability to access it early, and then be able to read, process and understand it in order to make the right decisions.
Only with this visibility will businesses have the information they need to plan and adjust early enough. If they have this view, issues with one supplier or source will no longer cause disruption, as data will enable contingencies to be deployed early enough in the process to smooth out any bumps.
It’s the reinvention of a 300-year-old process, turning creaking logistics into a resilient supply chain that can withstand threats, improve risk mitigation and maintain business continuity in a post-coronavirus world.
How Arviem can help
Where does Arviem come in? We enable businesses in all industries to unlock real-time, data-driven decision making. We do this by bringing together operations, sensors and analytics to give our customers a clear view of their supply chains, identify problems early and act accordingly. From container tracking to cloud-based dashboards, we use the best of simple hardware and sophisticated software to deliver both container and network-level visibility across the world.
So whether there’s a localized political crisis or one of your manufacturers is at the center of a new epidemic, or storms are disrupting a mode of logistics, you have the capabilities to continue moving your goods from one part of the world to another. Delivering what your customers need, when they need it, with minimal disruption.