Evolving your supply chain, in the context of Covid-19

Published: April 29, 2020
Author: Lorcan Sheehan

When Covid-19 blasted its way into being, the initial focus for many companies was to react to a sharp, short-term disruption in the market.   Non-essential projects were put on hold and companies ‘locked down’ to survive turbulent conditions.   

Government supports have helped to cushion some of the immediate consequences while companies and consumers found new ways to continue to source critical supplies in a market that has seen:

  • Effective closure of much of the hospitality and travel / tourism sector
  • Closure of much of the Brick and Mortar retail trade in impacted economies
  • Shift in consumer spend to perceived essential goods
  • Disruption to global logistics flows – particularly airfreight with the reduction in global passenger aircraft ‘belly freight’ capacity and delays in some cross-border trade flows
  • Significant pressure on critical healthcare supply chains that need to cope with increased demands
  • Operating restrictions for those companies that can still trade to protect staff and customers with appropriate physical protection and social distancing
  • Economic fallout resulting from the impact of closures and disruption to industry

As there is now discussion around the steps to gradually reopen economies, it is clear that we will be living with restrictions from Covid-19 through the rest of 2020 and likely into 2021.   Expectations of a ‘V-Shaped’ recovery are diminishing and there is a new list of essential supply chain projects that need to be tackled.    

In the re-boot category:

  • Supply chain planning for the balance of 2020 and 2021 needs to reflect new volume and channel scenarios
  • Operational plans need to assess the ability to support these plans with:
    • Restrictions that will continue with the need for social distancing internally and with key suppliers
    • Impacts on inventory from spring and summer season demand that may not now sell through
    • Likely continued shift towards online channels from consumers that have been increasingly educated to service their needs from home
    • Continued loss of airfreight capacity until passenger numbers recover and potential need to shift increased volumes to ocean
    • Impacts on suppliers, providers and customers that will have been affected by Covid19
    • Impact on returns flows and additional precautions that may need to be taken
  • Contingency plans to deal with potential subsequent waves of infection and the disruptions that these may cause
  • Explore opportunities to achieve supply chain cost reductions and inventory realignment in response to the revenue impacts from Covid19
  • Continued preparation for BREXIT as throughout this disruption, we continue to eat through the transition phase.   Unless a decision is taken to extend this transition, the full customs and trade impacts of BREXIT will take effect from 1st January 2021.

For many industries, the current wave of disruptions are occurring in a traditionally quiet quarter and many operations are already struggling with reduced capacity.    With some level of restrictions extending through the year and a shift towards more online orders we are getting feedback that may operations – internal and third party, will struggle in a ‘business as usual’ context and that additional provisions will need to be made.

In the medium-term, the issue of supply chain resilience will need to be re-addressed.    Although much is being written about an over reliance on China manufacturing, this is less about near shoring vs offshoring.   It is more of a systematic approach to understanding and preparing for potential supply chain shocks, ensuring that your company has the systems and processes to gather key information quickly, clarity on options and decisions that can be taken and the resilience to respond and recover quickly.     Much has been learned in the recent months about vulnerabilities in all of our supply chains and it is important that we take those learnings into account for future network, systems and process design.   

PerformanSC are actively engaged in these discussions with many of our clients and continue to operate in a manner that respects government guidelines and client policies around Covid-19.   Our focus is in using the deep knowledge and experience within our team, with data-driven insights and tools to support clients in practical ways to improve their supply chains.  

Supply chain teams have contributed to the successful response to Covid-19 to date, and they will be critical to navigating a path through recovery. 

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