The first question in 2020 for logistics companies will always be, “What is the lesson of the Covid-19 pandemic for the global supply chain?”
Indeed, the coronavirus pandemic will force companies to restructure and make better use of technologies, diversifying their chains.
ARMOR THE SUPPLY CHAIN
There are 5 main reasons for the fragility of current supply chains:
- Minimum stock levels
- High chain stiffness
- Manual chain management
- Lack of transparency and chain visibility
- Centralized production
Minimizing the effects of variability to avoid interruptions in supply will not be an easy task. And the increase in stock levels or the number of suppliers will also not be well regarded, as this will inevitably impact the final price offered to the customer.
Supply chains, in addition to being robust, need to be flexible and resilient to guarantee supply even in troubled periods. In addition, chains need to be smart to learn and improve. Therefore, the chains need to evolve and become fully digital, both in relation to suppliers and in relation to managers. See that even in 2020, many international freight forwarding companies still operate based on paper and in purely manual management, with a slow and reactive culture instead of agile and proactive.
To form resilient supply chains, there are at least 5 aspects for which managers must pay special attention:
1) Review and identify items originating in areas of the high risk of interruption of supply.
2) Make a real estimate of the existing stock along its value chain. That is the stock level that really adds value.
3) Make greater use of technological tools for statistical demand forecasting in order to more realistically define the ideal time horizon for forecasts and to make better decisions in the event of events and incidents.
4) Test prospective scenarios to better analyze production capacity from a financial and operational point of view.
5) Through contingency planning and through real-time visibility (cargo tracking, eg), adopt agile approaches and forms of management to quickly adapt to situational changes.
6) Ensure that the supply chain risk analysis is part of the procurement and governance strategy.
7) Develop more reliable supply networks, involving customers, competitors, suppliers, and even public agencies, all with a focus on risk management.
The COVID19 pandemic will not be in vain, but an opportunity to learn, prepare, and improve, in an attempt to overcome other crises that may arise.
It became clear that supply chains are less global than previously thought. At the end of the crisis, supply chains are expected to migrate to Southeast Asia, Bangladesh, perhaps to some Eastern European countries that were already emerging in global supply chains, as well as to Mexico. This is even difficult to predict since supply chain ties with China were very strong, but there will be significant changes in players in the world market. Indeed, the scenario for a redesign of global supply chains was already consolidating with the natural events described above and with the intense trade war, with the pandemic taking on the role of a “drop of water”.
There will always be a “trade-off” between costs and risks, but it is believed that after the pandemic, Cargo and Freight Shipping Service companies will want to minimize risks and work with a variety of suppliers, instead of “putting all eggs in one basket”, so that when this pandemic is over, companies will split under a certain point of view, into two types:
1) Those that will not change, and will pray that such an event will never happen again. These will count on luck.
2) Those that will learn valuable lessons from the crisis, making the necessary investments so as not to operate blindly in another similar event. These have the greatest chance of winning.
After this crisis, the risks, vulnerabilities and impacts in the supply chain must be assessed and mapped in all sectors, be it industrial, business, public, air transport or other modes. And also through risk governance, sustainable, resilient and anti-crisis management must be pursued. For that, a digitalization process of chain management is necessary, providing them with speed, precision and flexibility, since the digitized supply chain favors risk management through better visibility and coordination over its complexity.
As said, globalization as we know it will be shaken, but it is not simple to stop it, there is no on / off button.