Covid-19 hits the global supply chain:
There have been significant challenges throughout global supply chains due to the Covid-19 pandemic. It raises the question as to whether particular supply chains around the world were flexible and quick to respond to the global changes that may have affected their business operations.
When the pandemic first hit; consumer behaviour changed rapidly. Supermarkets and local stores experienced customers panic buying for supplies due to a fear of items selling out and becoming unavailable. This sudden change in purchasing in large quantities, caused many supply chains to experience an inability to cope with the high demand. Many organisations were not prepared for such a dramatic change, with only 10% of companies being fully prepared for the impact of Covid, as reported by Verusen. More than ever, digital transformation has now become a key strategy moving forward, with the future of supply chains investing more in the digital area than ever before. Why? Having a digital backbone in supply chains has proven to enable a competitive advantage with real-time visibility to help make better decisions to reduce overall operational costs.
Trouble in China. How one country impacted the global supply chain
Major industries rely on logistic companies and open country borders to maintain a flow of resource exchange. Industries such as electronics, pharmaceuticals, medicine, automotive, steel, and iron manufacturing were all affected by the change in the world’s behaviour.
China is the world’s most powerful production centre and has been for the past two decades for trading raw materials, high value products and components. In total, China’s market value accumulates to around $760 Billion, recorded by Bloomberg. There are more than 200 Fortune Global 500 Firms that have their operations based, in Wuhan alone, which shows just how many organisations based within China were negatively impacted due to the pandemic.
China has faced colossal challenges during the pandemic on its effectiveness to trade globally whilst abiding by government guidelines. Cargo was backlogged and held at container ports due to a shortage of truck drivers affected by travel restrictions. Transportation network capabilities were strained with strict lockdowns and road closures, limiting trade all throughout China.
Deloitte investigated China’s impact on the supply chain, and found that only 43% of small and medium-sized Chinese businesses resumed operations by the end of 2020. Why? Well, there a few reasons, but the main influence is many companies not having enough visibility around the crisis, so were not able to manage the risks involved. Even in 2021, there is still uncertainty of businesses resuming operations with the Covid virus still spreading across China. How certain can supply chains be in trusting that another lockdown won’t take place, or if the virus has another deadly wave affecting employees and business operations? Deloitte concluded that the magnitude of further industry disruptions will depend on China’s ability to recover from new covid cases in the upcoming months.
What comes next?
The pandemic accelerated the speed of digital transformation throughout many sectors around the world. Supply chain organisations had to rethink their strategies to become resilient against the challenges the crisis provoked. From understanding large quantities of data to deliver items on time through national lockdowns and border restrictions, to using AI technology to make smarter decisions when transporting goods, technology is key, and more organisations are investing in this area despite the uncertain economic conditions.
An example of how digital transformation is reshaping supply chains, is the partnership between Microsoft and FedEx. In 2020, the partnership was formed to enable FedEx to react more effectively to its supply chain difficulties. They developed a product called FedEx Surround, which gathered FedEx’s data from the extensive logistical network with Microsoft’s Azure cloud and data analytics solutions. According to FedEx’s press release, it has enhanced visibility into their supply chain by leveraging data to provide near-real-time analytics into shipment tracking, which will drive more precise logistics and inventory management.
Digital transformation is key for strategic growth. Having a digital backbone has strengthened the business models and strategies of many supply chains. A survey conducted by Ernst & Young LLP investigated 200 senior-level supply chain executives at organisations within various sectors. Their findings showed that businesses are already seeing a shift from linear supply chains to more integrated digital networks connecting many players.
Over 52% of executives surveyed in Ernst & Young LLP’s campaign predict that more technological driven supply chains will be used more in the future; robots in warehouses and stores, driverless forklifts and trucks, delivery drones and fully automated planning could be here by 2025. With the changes in digital technology, efforts in training workforces within supply chains will be critical.
Adapting new strategies throughout the pandemic has delivered some exceptional results within supply chains. Technologies such as IoT devices and sensors have helped collect and manage data to communicate quickly where goods are located, including any issues caused within the chain. For example, temperature-controlled networks are important transporting food, vaccines or other medicines. Technology has huge potential to make supply chains more efficient and streamline.
It’s clear that the pandemic has accelerated the demand for supply chains to invest more in digital technologies and rethink their strategic approaches. Organisations have had to react faster and become more innovative or otherwise suffer the consequences of outdated business models. Now, more than a year since the pandemic hit, many organisations are regaining strength and momentum with new successful supply chain models, due to new investments in technology advancements. However, the Covid-19 pandemic should be an acute reminder that the future can be uncertain and unpredictable. To remain resilient and ahead of unknown future disruptions, organisations need to be pioneering in how they manage their supply chains, continuously seeking new ways to evolve within the world’s markets.
Enjoyed this blog? Check out our previous blog which highlights how the travel and transport sector reacted to the Covid-19 crisis. Read here.
Want to find out more about how Adatis can help with your digital transformation? Contact us here.