The drastic changes to life in lockdown have suddenly weighted the supply/demand dynamic to one side, with supply unable to keep up with demand, exposing some critical weaknesses in the supply chain industry.

 

The coronavirus pandemic has impacted almost every industry and business area worldwide, and while some have thrived, the majority are finding the situation tough to navigate.  

Both camps, however, have supply chain and procurement in common, underlining the significance of the sector. The drastic changes to life in lockdown have suddenly weighted the supply/demand dynamic to one side, with supply unable to keep up with demand, almost everywhere, which in turn has exposed some critical weaknesses in the supply chain industry.

To take one topical illustration of this, the “business” of dealing with the Covid-19 virus itself has been hampered for many countries due to poor supply chain management, which has resulted in a severe shortage of PPE, testing kits, ventilators and even refrigerated morgue space. Successfully managing a supply chain requires fast, efficient co-ordination between demand, procurement and delivery. Using the virus example, we can perhaps excuse demand management – the need for all of those items is of course unprecedented and it would be inefficient to stockpile in great quantities (and go against the trusted Just-In-Time inventory management concept). That may change of course, in a post-virus world. However, in terms of procurement, some reported statistics have shown the vulnerability of putting all your eggs in one basket. For example, 95% of surgical masks are apparently made outside of the US. And when the UK predicted a shortage of ventilators, manufacturing companies, who were ready to pivot into producing them much as car firms began making tanks in WW2, quickly discovered that certain components were only made abroad.

While we all hope the current pandemic is unique, there have been a number of high-profile natural disasters over the last decade that have had an enormous impact on the global supply chain. Earthquakes, floods, tsunamis and hurricanes hit the headlines frequently enough to no longer be considered rare, and a volcano eruption in Iceland in 2010 closed the airspace over 20 countries, which had a massive impact on supply chains. Despite these events, surveys have shown that most companies were still unprepared for the coronavirus pandemic and in terms of supply chain, the only way to minimise the impact of these events and mitigate risk is by investing resources into supply network mapping.

Mapping the supply network into as much detail as possible enables a business to be better prepared should a rare event occur. It provides visibility throughout the chain to show which suppliers, locations or products might be at risk, affording an early move to another channel. In the UK, as early as January, frozen food company Birds Eye made moves before their competitors due to some detailed and diligent research coming from their Italian team where the coronavirus had already hit. They changed their range of products to free up space in the supply chain to cope with the demand they could see coming and introduced social distancing and thermal imaging early in their factories, to ensure business continuity as much as possible. 

The reluctance to map a supply network, particularly for large organisations, is the level of intense work and therefore cost involved, but again, in a post-virus world, this stance may change, and that investment may be considered worthwhile. Whether industries learn from their experiences during this pandemic remains to be seen, but the outbreak has shown just how crucial supply chains and procurement are to both battle the virus itself and still be in business the other side of it. 

If you’d like to learn more about this topic, please don’t hesitate to reach out. I’d be very happy to share my insights on the market.
 

 

About the author

 

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Steven Frost

Associate Director – Supply Chain & Procurement, Hydrogen Group

Steven heads up Hydrogen’s Supply Chain & Procurement practice in the UK.