The sudden outbreak of the Corona Virus has been causing a huge disruption to the Manufacturing, Retail and the Global supply chains, with a great impact on the businesses, consumers and the Global economy. Employers are worrying about how to tackle the issues on protecting their workforce, while ensuring the supply security, mitigating the financial risks, address their brand value in the society, and navigate through the uncertain times.
From health care to economy, the pandemic crisis has a far-reaching impact on the Employment index and organizational health, and on every stage of the supply chain, due to the restricted movement, shortage of workforce and labor and unusual demand patterns. As per a recent survey, 75% of the companies have experienced supply chain disruption due to transportation issues, while 80% had taken a set-back due to the crisis. The revenue targets were also decreased by an average of 6% for most of the companies.
COVID pandemic isn’t the only issue that has disrupted the Supply chains. Before the advent of the virus globally, the US trade policies have created a lot of disruptions to the manufacturers. 21% of the manufacturers have faced impact due to governmental restrictions. And now, due to the blockage of the resources from China, and shut down of the plants there, many manufacturers had to shut their operations down. Whilst it is always possible to find out the other suppliers at different regions, it is not always possible that the parts can be sourced easily from elsewhere.
It is evident that the organizations need to manage the current crisis situations with innovation while building solutions that offers resilience at times like this. It is very important to point out that while the Short-term solutions are crucial, Long-term solutions have become more critical and important. For organizations of any scale, Agility has always been the key strategy.
A few impacts due to the crisis have been listed and summarized below:
Shortage of Supply and Increased costs:
The manufacturers have to rely on the piled-up safety stock, and this stock end up finishing at some point of time. When existing inventory gets exhausted, we end up with the shortage of stock and increase in the prices of the goods throughout the supply chain, when the alternative sources are not found.
Delays in Supply to Customers:
Travel restriction, Lockdowns, and shortage of work force make it difficult for the manufacturers to fulfil the obligations of the contracts to their customers. A delay in the fulfilment costs the company their Goodwill and even a loss of clients and also result in a legal battle.
Transport price hike:
When there is a resume in the operations and production, all the companies rush to the digital market to sell their goods and thus resulting in a sharp hike in the transportation prices.
It is yet to be seen how the economy can rebound, especially the Chinese market from the crisis, and any slowdown in the Global demand might create a havoc due to the existing US restrictions.
An organization has an obligation to constantly deliver what is promised by them to keep up the brand value. When the business fails to deliver the promises, even when the failure is beyond the control of the organization, their Goodwill and Brand value will take on the hit. It has to be seen that the shortages are an important dimension for the brand preservation in the longer terms.
Finally, after a thorough research on the impacts of the Crisis due to Pandemic has on the Supply chain disruption for the manufacturers, we have outlined five key considerations, that the manufacturers have to consider while sourcing the strategies.
Diversification of Resource Acquisition:
Many companies have depended on their resources from China single-handedly for the longest period of time, and when the disruption struck, it has become difficult for them to find resources from other regions to supply for their production continuity. By shifting the location of resource acquisition to different countries, the organizations can actually mitigate the impact of natural disasters or the government regulations on their businesses.
Warehouse management and Inventory management systems offer the required visibility for the manufacturers, the suppliers and the customers, creating a more trustful supply chain environment in the times of crisis. Technologies such as Automated warehouses, RFID based inventory management helps with increased visibility. By investing on these technologies and increasing the real-time visibility of the stocks, helps the businesses to plan their strategies proactively, and identify potential risks and develop solutions in order to prevent the disruption of the supply chain network.
The demand curve has changed for almost all the manufacturers due to the crisis. There has been a significant increase in the demand for essential goods as the customers have started piling up months’ stocks at a time due to uncertain situations. There has been a significant shift in the demand for other products too. It’s high time that manufacturers consider agile strategies while planning production and inventory investments with the support of the automation systems to optimize their responses.
Business Continuity Risk Assessment:
It is always mandatory to carry regular risk assessments of the business continuity even though the occurrence of the natural disasters or the pandemic is out of control for the organizations. This helps identify potential internal, operational, financial and market risks and to determine the impacts- direct or indirect on the business, and generate contingency strategies, due to unexpected supply chain disruptions.
Resilience and Agility in the Business strategy:
Effective supply chain management is all about Agility and System-driven thinking. The Supply chain is an inter-dependent and inter-connected network. It requires end-to-end visibility throughout the eco-system that relies on the real-time data to identify the demand or consumer behavioral shifts and the disruptions and adapt to the changes faster. This has to replace the traditional Lean approaches for a greater Supply chain network management!