Impact of Covid 19 on Supply Chain Consulting

Published on November 23, 2020 by Rahul Wadhawan

COVID-19 is probably the biggest disruption to supply chains that we have seen since World War II. The pandemic has affected every aspect of the supply chains of a number of global industries, complicating both upstream and downstream supply lines. The resulting absence of operational tractability and resiliency thereby led to an inability to handle calamitous commotion, posing an existential risk to numerous companies.

Covid-19 crisis could top $5 trillion in economic losses worldwide, if supply chains spanning the globe fail to adapt to reduce exposure to threats to business survival, such as a further wave of the pandemic. Additionally, supply chains must evolve to learn lessons from the initial outbreak of Covid-19 if they are to withstand the pressures of a second wave. The year 2020 has been a year of massive challenges for global businesses and predominantly for supply chains.

Companies now have the impulse to reinstate the broken operations in the proximate term, while reconsidering and reshaping what the supply chain can handle in prospective future. From all the lessons learned from the COVID-19,disturbance is the reminder that organizations plan as if calamitous disruptions occur only one time in a generation.

Some changes were observed and future steps companies have already started to implement across their respective industry verticals –

Amidst the pandemic, manufacturers need a superior perceptibility into the supply chains of their suppliers, a practice worth lasting
- Leaders are smearing automation and robotics to make their supply chain more independent and adding suppliers in their home markets to ensure business continuousness
The most robust firms might use a “control tower,” or a supervisory platform, which governs a real-time, integrated and well-informed supply chain through end-to-end visibility and analytics
- Procter & Gamble, applied cloud-based platform to provide instantaneous information on production and outward demand to its supply chain control tower
- The deployment aided minimalize the fallout when Hurricane Sandy knocked New Jersey in 2012, unsystematic production at a factory producing 91% of its perfumes

Impact story – Challenges and trends

Around 75% of businesses reported supply-chain commotions of one form or another due to corona virus-related transportation limitations, according to a study conducted by a renowned Institution, which stated that the impact numbers are expected to increase.

Global supply-chain shock waves

The large-scale, widespread and simultaneous demand and supply shocks set COVID-19 apart from all past crises (2011 earthquake in Japan and a massive rise in raw material prices).According to few key executives at a Management consulting company, “The current crisis has spread in phases and can be understood well by classifying these phases as a series of three overlapping waves “

The first impact started with manufacturing shutdown in China, followed by downfall in local demand. As the virus spread, the same jolts hit other Asian countries, including South Korea and Japan
The second wave moved into Europe. First, supply scarcities from Asia (resulting from the first wave) and then local production cessations hit European companies
The third impact was taken by North America. Alike to the pattern in Europe, US companies were primarily hit by the impact of the Asian and European supply-chain commotion shock waves before domestic effects started to reveal themselves

Recovery Measures: Given the bigness of the COVID-19 jolt, the impact on supply chains cannot be copiously abridged, but the right actions can un stiffen the setback to some degree. Some measures which companies considered to reduce the supply chain impact, includes –

Achieve end wise pellucidity on its supply chain and cope with the instantaneous situation by implementing indispensable ad-hoc actions
Setting up of a dedicated task force working towards development and assessment of manifold demand situations for the next six to eighteen months
Determination of available supply options in Asia. The companies might need to meet the requirements of new suppliers, thoughtful deployment of spot buys, or possibly protect strategic supply chain control by obtaining precarious access to secure sufficient supply until complete reclamation

In order to succeed after the crisis, companies need to create recovery plans now and update them regularly as the Covid-19 situation progresses, since it may take 3-4 cycles until supply chains are fully back in stable-state mode, through the rest of 2020 and potentially into 2021.

Challenges in Supply Chain – An opportunity area towards SCM

COVID-19 did not just create new contests for organizations, additionally it exaggerated existing challenges within supply chains which require attention. Some of the major challenges, are listed below –

Supply chains are in dire need to advance. Until now, most have been based on incremental trade-offs between cost and service.
Supply chains are sensitive, uncompromising, and at best responsive. As service demands have amplified, companies looked to elevate efficiency. This was somewhat accomplished by reducing the flexibility and resiliency of the supply chain.
Supply chains provide services the same way they did 10 years ago. A cost-center outlook slowed down the adoption of much-needed innovations.

Companies expect a better operational-environment clarity at this point. Instead, they are discovering that there are more queries than responses. At the same time, various organizations feel the obligation to re-open business activities, even if they lack critical information needed to guide those actions. This challenging environment will continue for the anticipatable future.

Amid the pandemic disrupting supply chain operations across the industry and companies, some of the steps below can alleviate the impact. Considering the negative impact of Covid-19, the industries are in dismay on what steps should be taken to overcome the Supply Chain impact.

The below highlighted points are likely to be implemented by organizations across various industries -

Assess component shortages: Companies with wide-ranging international supply chains should carefully judge the shortage of constituents required for production
Increase communication and visibility: Enhance visibility of the supply chain. Improve communication lines for better coordination between vendors, suppliers and the companies receiving the requisite components or products
Make contingency plans: Companies must seriously consider implementing contingency plans to mitigate the impact due to supply-chain disruption
Consult among departments: Demand planners should consult sales departments and data analysts to meet demand
Centralise processes: Centralise all buying, inventory management and distribution to leverage distributors
Devise new solutions: Proactively implement predictive data models and business intelligence solutions

Supply Chain Consulting Guidance for the Logistics sector - The following aspects provide aspects that may require attention

Capacity: Identify and secure logistics capacity. Prearrange logistics capacity to minimise exposure to potential cost increases
Transportation: Adopt flexible transportation methods where possible
Inventory and consumption monitoring: Develop an interactive dashboard to monitor inventory consumption behaviour
Fleet redeployment: Reallocate taskforces and inventory to high-demand sites and customer segments
Retort to the e-Commerce surge: Go All-Out to meet the raised customer anticipations as e-Commerce providers upsurge market share and logistics competences

“How Acuity Knowledge Partners can help”

We at Acuity Knowledge Partners provide a comprehensive support to SCM consultants so they can help their clients manage supply chains better. Our organization, partners with SCM consultants to provide subject-matter expertise across the spectrum of services in the supply chain sector.

Some of the Key Supply Management Solutions we provide, comprise of –

Supplier market assessment
Vendor selection
Cost modeling
Monitoring

Additionally, there are numerous other solutions & services which Acuity provides to clients across the globe. For a detailed overview of our capabilities, please our website Acuity Knowledge Partners – Our Solutions.

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About the Author

Rahul Wadhawan

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Rahul Wadhawan has been with Acuity Knowledge Partners (Acuity) for five years and has in-depth business research experience. In his current role, he provides support on pilot projects, rapid research work, report writing and database research.

He also worked in Acuity’s Costa Rica office for more than two years, supporting a rapid research division. He holds a Post Graduate Diploma in Business Management from the Apeejay School of Management and a B.com(P) degree from the University of Delhi.