It is an obvious truism to state that 2020 has been a bad year for supply chains. The initial panic following China’s lockdown in February turned some of the world’s busiest ports into near ghost towns, and resulted in millions of people temporarily — and in many cases permanently — losing their jobs.
Even before the second wave of national lockdowns swept Europe this November, the supply chains were hardly back on their feet from the trauma endured at the end of the last winter period.
And it is clear that even with a vaccine or some other effective way to control the coronavirus, there will be further disruptions to businesses in the near future.
Assessing the coronavirus battle field
It may feel like a long time ago now, but there is still a huge backlog of delayed goods waiting to be shipped from China. The unprecedented decision for the country to lockdown the entire Hubei province was a supply chain earthquake of sorts, of which aftershocks are still being felt today.
This despite the fact that life seems entirely back to normal in the province as of November, with mass public gatherings now frequently allowed to go ahead.
But things are far from normal in production houses focusing on an assortment of materials including textiles, garments, electronic components, mobile phone parts, and medical equipment and more. And it will be a while before they start looking anything like they did before the coronavirus emerged.
It is a similar story if you look to the industrial zones of South Korea and northern Italy, both of which were impacted very badly in the early spring, with seriously considerable contractions in their export capabilities still obvious now.
What, then, can businesses do to mitigate the damage that future shocks will inevitably pose to the supply chains?
A new relationship with suppliers
Despite all of the gloom presented above, things are getting a little better. The ‘new’ lockdowns are not as restrictive as the ones in early spring. And scientists know a lot more about the coronavirus, including how it spreads and how to treat it.
This knowledge will all help to lessen future trauma to supply chains — but we aren’t out of the woods yet.
Here’s what you can do in the meantime: review all of your inventories and policies, and then contact your suppliers to do the same. If you do not already have a close relationship with suppliers, now is the time to start building one.
It is important to get to know and understand your suppliers. So that you can work around disruptions as they arise. Having a more intimate knowledge will also enable you to move from one supplier to the next, in the event one of them is too heavily disrupted to deliver.
A good place to get your bearing is this checklist, provided by McKinsey Consultants. Every pointer is invaluable, but the most important is the one that stresses the need for greater transparency on the supply chain.
Having a transparent supply chain is always beneficial and never a liability in ordinary times, but in the age of coronavirus it is crucial. Especially if your supply chain is multi-tiered. The importance of a transparent supply chain cannot be overstated.
Ideally, it should extend as far back as knowing where the raw materials of your components come from, and if they are vulnerable to disruption. Even some of the biggest companies do not do this — but you should.
It is also time to rework pre-existing contracts with your suppliers, if you haven’t already. As they might try to claim force majeure if they do not deliver the goods on time. In addition to forging closer relationships, try to think about how you can take some of the pressure of your suppliers and even help them out.
Concessions such as relaxing deadlines for goods’ deliverance, payments, and tweaking your orders will all go a long way to helping your suppliers get what they need. And this in turn will serve your business operations better.
Returning to normal or, would you really want to?
It might seem inconceivable now, but at some point the coronavirus pandemic will come to an end. At some point there will be a return to normal or at least, a return to the relative calmness of not having to social distance and lockdown venues, and so on.
But if ‘normal’ means ‘how things were’ then no business which cares about its supply chain should want to do it. In order to keep ahead of the competition, you will have to keep close with suppliers and remain close. There are many ways this can be done, careful sales planning and operational planning being just two of them.
Now is also the perfect time — if you haven’t already — to think about moving beyond the current structures of your supply chain.
Your competitors are likely already in the process of upgrading to new ‘smart’ supply chain systems, and taking advantage of Industry 4.0 tech, such as the digital twin, increased AI, 5G analytics and more.
The advantages here are obvious, including real time analyses of weaknesses in the chain, allowing for quicker response and damage mitigation times.
Smart supply chains will come in handy for the next inevitable pandemic, which by the way, are not that unusual. As we have seen with the emergence of H1N1, SARS and MERS, all in the not-too-distant past.
It is also time to complement relocating the source of your operations. This could be a case of ‘reshoring’, which is globalism in reverse, bringing manufacturing back closer to home. Or a case of moving out of China into another country, which many companies are in the midst of weighing up the pros and cons.
But no one is really sure what the best course of action is at the moment. For now, do your utmost to aim for transparency in the supply chain. And work to establish closer relations with your suppliers.
Work hard to achieve both of these steps, and your supply chain could function even better amidst the coronavirus turmoil.
Thomas Owen is logistics manager at Dpack packaging solutions.