While the world is fighting the coronavirus pandemic, business is struggling to mitigate the supply chain shocks caused by the virus. We are looking into the technological shifts that may emerge out of it.
Rising supply chain transparency
Do you already know how your supply chain is affected? Many companies aren’t, even if they think so, says Josh Nelson, supply chain expert at the digital consultancy Hackett Group. They may know about the supply chain risk of their first-tier suppliers, but “there can be hidden problems in the other tier suppliers that companies would not otherwise be aware of”. He quotes one example from the Fukushima nuclear disaster in 2011: The lithium-ion batteries Apple used for its products required polymers from a plant near Fukushima – the weakest link broke the entire supply chain.
Nelson expects a significant move towards risk detection and mitigation: “Tools for supply chain visibility have improved dramatically in the past few years, which makes it easier to address this issue.”
“The best thing that companies can do is to simply know their supply chain risks, and preemptively develop mitigation approaches.”
Supply chain regionalization
When the global shipping routes are disrupted, it pays off to have your suppliers closer to your production site. That’s music to the ears of those, that want to de-globalize their economy anyway, like US trade adviser Peter Navarro: “A lot of our supply chain is in China, some of it is in India, some in Europe, but we’ve got to get that back on shore”, he said. “This administration is moving as rapidly as possible to make sure our supply chain is secure and we have what we need.”
Sure, there is some belligerence involved. “People need to understand in crises like this, we have no allies”, Navarro said. Companies will likely use a different approach – in their supply chain they are not dealing with enemies, but with business partners. But in any case there will be (political and economic) pressure to bring the suppliers closer to home. From this will emerge a rising demand for technologies and services that can optimize a more regional supply chain.
It´s crunch time. The trade disruption is happening right now, and it will lead to a risk-off mood at supply chain and procurement managers. And this means: better to have too much stock in the warehouse than too little. Resilience gets more important, efficiency less so. That would be a significant shift from the previous de-stocking trend – and would be a boost for technologies that can reduce stockpiling cost and/or increase warehouse resilience (and efficiency, if possible). We have one of those at hand, by the way.