By now, it has become clear that a hyperconnected world can be brought to its knees by a singular global event such as the COVID-19 pandemic. We have not yet seen the extent of the aftershocks. Food shortages, for example, may be on the horizon for countries around the world, with many of the most vulnerable populations slipping into famine.[1]
Supply chains are the center of attention. After decades spent building up a just-in-time model that placed emphasis on speed and margins, organizations are realizing that resilience and sustainability are just as critical to success as basic efficiency. A report[2] by Standard Chartered addressed the impact major crises can have on supply chains and found that organizations were already seeking to diversify during the China-U.S. trade war. The pandemic struck too quickly for most organizations to be able to respond in time, but now, as the crisis enters its fourth month, companies are beginning to find their footing.
In the report, Samuel Mathew, global head of documentary trade for the transaction banking business at Standard Chartered bank, said, “As it stands, we are already starting to see some real innovation in supply chain agility. Several auto and electronics companies are quickly repurposing their production lines and logistics chains to produce masks and ventilators to address current shortages. Some smaller outfits are also starting to delve into 3D printing of masks. These emergency measures may well define the supply chain agility of the future.”
Kick-starting digitization
One trend that Standard Chartered believes will grow stronger in the coming months and years is the drive to replace paper trading with digital systems. The pandemic has given organizations an opportunity to implement networks and data flows that operate independently and remotely. Getting remote work right, for example, by ensuring cybersecurity and cyber-resilience,[3] can initiate transformations that can carry companies into the future.
For reference, Peter Wood, founder and CEO of First Base Technologies LLP, lists the following key issues[4] and components of a cyber-resilience strategy:
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Good governance, including leadership, devolved decision-making and appropriate escalation;
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Nimble information technology and information security responses, such as the ability to increase capacity or shut down, isolate or load balance systems;
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Up-to-date and well-tested public relations policies, with key issues decided in advance (such as the organizational stance on issues, planned responses, and media releases); and
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Crisis preparedness: updated plans that have been rehearsed and tested with real-life simulations.
Establishing a shared digital system with partners and suppliers—such as a blockchain or cloud-based solution—can provide a host of easy solutions to thorny problems. Communicating policies and protocols is much easier and more effective when the platforms used to communicate are tied into one digital system. There are a host of solutions that do just this, but not all companies have taken advantage of these tools, and when they have, the implementation has not always been smooth and uniform across departments or regional offices. This crisis presents an opportunity to assess digital systems and improve upon them.
Mapping and crisis response
Two of the most critical elements of supply chain management are accurate mapping and an effective crisis response protocol. Supply chain mapping[5] is an ongoing process that tracks inflows and outflows, identifies hubs and bottlenecks, and provides visibility of inventory, vulnerabilities, order/purchasing patterns and forecasting, to name a few. Nothing can happen until the supply chain is adequately mapped.
Many organizations have found that their crisis response plan, if they had one, was not up to the task of handling the impact of the pandemic. In a March article[6] discussing this very topic, RSCC talks about some steps organizations can take to quickly meet the crisis head-on, as well as the role informal networks play in spreading the word about effective solutions.
Supply chain agility
Organizations have a choice in front of them: return to the old ways of doing business once the pandemic is over or use this crisis as an opportunity to transform the way supply chains are managed. One idea, mentioned in the Standard Chartered report, is supply chain agility.[7] This can refer to the ability of an auto manufacturer to quickly re-fit a factory to produce a different product, or it can refer to the ability of an organization to quickly pivot to new suppliers, new logistics and even new markets during an unforeseeable event.
All of the terms attached to supply chain management—resiliency, transparency, sustainability, efficiency and now agility—have a supply chain in mind that has been thoroughly mapped and assessed for risk. The pandemic has pressed pause on much of the world, but for supply chain managers and compliance professionals, there can be no rest.
Takeaways
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COVID-19 presents an opportunity to study supply chains and determine ways to improve them and create resiliency where once there was only efficiency.
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Supply chain mapping is the key to all other endeavors. Once a company has visibility of a supply chain, finding risks and opportunities becomes much easier.