By Adam Murray, Logistics Manager at Dpack.
It is no fantasy to say that supply chains have taken one of their biggest hits in recorded history this year. It all began when China made the shock move to implement the first of what was to be many lockdowns globally as a means to curb the what-was-then unnamed Covid-19.
The knock-on effects of the Chinese lockdown were felt immediately, causing disruption and cargo delays for months. And, at the time of writing, with a second wave of lockdowns imminent over Europe (though curiously not in China), it looks like there is no end in sight to the complications the coronavirus is still wrecking globally on supply chains.
The ruins of the coronavirus
February might seem like a long time ago now — the time of when China’s Hubei province locked down — but export delays and shockwaves are still being felt today. Industries that deal in anything from textiles and garments, to mobile phone hardware, electronics, and medical products are still suffering lags from the initial trauma. And they will probably be feeling them for the foreseeable future.
The same is true for any businesses that leaned heavily on the industry-heavy locations of Northern Italy and South Korea, which faced similar trauma in the months after the Hubei province did. In fact it still isn’t clear how much initial damage Covid-19 has inflicted on these industrial regions. But it is not beyond the realms of impossibility to predict a total export contraction by as much as 40 per cent for the remainder of the year, and maybe even beyond them.
Clearly in these turbulent times, some amount of adjustments will be necessary to keep your supply chains running with as minimal impact as possible.
Switching up your relationship with suppliers
As we learn more about the coronavirus, how it spreads and makes people ill, we will undoubtedly get better at mitigating future disruption. But we aren’t at that point just yet.
What we can do in the meantime is call for a review of our inventories and policies, and ask the same of our suppliers. It is important that, during these turbulent times, we work to build closer connections with our suppliers. Not least because it will be important to know how important each supplier’s role is in the chain. And, if any, what alternative suppliers can be leaned on if one if one is compromised.
A great place to start is this checklist which McKinsey’s Consultants has put together. The whole list is useful and essential, but arguably the most important step to tick off is the ambition for transparency. This is especially important when considering multi-tier supply chains. Transparency should mean going back as far knowing where the raw materials of your components come from. Even some really big companies don’t have transparency like this. But you should do, and especially during the pandemic.
In addition to building relationships, it is also important to build new contracts with suppliers. the temptation might be there for them to play force majeure if they cannot deliver on time. You can (and should) offer to help them though, if your business has the monetary resources. By being flexible on lead times, payments, adjusting orders, and other ways you can help your suppliers operate, it will not only help them, but also you a great deal in the medium and long term.
Acclimatisation in the era of COVID-19
Pandemics run out of steam eventually. And when (or even “if”) things do return to normal, then your business will have to make sure it works closer than ever with its suppliers in order to establish salience over your rivals and the competition. This can be achieved through careful sales and operations planning, so that if there are inventory fluctuations, you will know how to deal with it.
Now is also the perfect time to think about — and invest in — tomorrow. New “smart supply chain” tech such as digital twins, 5G data analytics, AI and more. The chances are your competitor will already be making similar investments, hoping for the advantage. Indeed, smart supply chains will give them an advantage if they have them, as they can detect in real time if there is a weakness within the chain.
Finally, it might also be time for your business to think about relocating. Many are already talking about ‘reshoring’ or reverse globalisation. At the very least, moving operations out of China. Though there is no clear alternative country like China to relocate to.
In short: there is still a long way to go before we are out of the sticky situation that Covid-19 has put us in. In the meantime, you will do well to work closer with your suppliers, in order to make sure your supply chain is as transparent as possible. Both are essential, if your supply chain is to succeed — and not fail — while the uncertainties of the global pandemic are still with us.