How to deal with supply chain issues in 2022 and moving forward

State of supply chains

In the eye of the storm

COVID-19 has disrupted supply chains around the world. But they’ve also been a vital lifeline to support the response, keeping essential medical supplies, food and other key necessities flowing where they’re needed most. There’s no doubt that the pandemic has tested the ingenuity, resilience and flexibility of supply chain leaders globally, as they have sought to maintain essential operations.

The pandemic has also proved to be a real test of corporate values and purpose. Consumers, investors, governments and communities may ultimately judge companies on how they respond to this period of disruption.

Impact on supply chains

With the virus still a live threat and a number of regions and economies in lockdown, while others emerge into a very different world, the disruption to supply chains continues to be severe. As economies restart, the supply chain will be critical to supplying goods and services quickly, safely and securely.

Business leaders must make rapid decisions, and take immediate actions to sustain business operations to serve their customers, clients and communities, as well as protect and support their workers.

The repurposed and reshaped supply chains of the future will need to be characterized by both resilience and responsibility. These will help communities manage the short-term crisis and enable businesses to build around their customers and help economies rebound.

Supply Chain Stats

94% of Fortune 1000 companies are seeing supply chain disruptions from COVID-19.

75% of companies have had negative or strongly negative impacts on their businesses.

55% of companies plan to downgrade their growth outlooks (or have already done so).

Risks and challenges

Supply chain risks

With the COVID-19 crisis, fundamental changes in consumer behavior, supply chains, and routes to market are knocking companies off balance. Responding to the pandemic has underscored the need for leaders to accelerate the adoption of agile ways of working and value chain transformation to help outmaneuver uncertainty.

COVID-19 is not a typical risk event. The scale of its impact eclipses anything most supply chain leaders will have seen before. The speed of the escalation requires continuous end-to-end assessment, optimization and monitoring. Companies need to respond rapidly and confidently to shape and execute a short-term tactical plan that will mitigate the risks to human health and protect the functioning of global supply chains. In doing so, strong data and analytics capabilities are crucial in understanding complexity, anticipating potential disruption, and quickly developing a response.

Supply chain challenges

  • Supply chains lack global resilience and are breaking down in the face of multi-country disruptions.
  • Supply chain and operations are becoming more costly (eg less global and e-commerce fulfillment costs) – and can often represent a company’s highest costs.
  • The significant impacts that supply chains and operations have on the planet and society are not meeting stakeholders’ expectations for sustainability.
  • Talent gaps across the supply chain and operations continue to create high dependency on the human workforce.
  • A lack of flexibility inhibits the ability to address customer demands for personalization and customization.
  • IT systems continue to be expensive to run, inflexible and often over-reliant on legacy technologies.

How to respond to disruption

Businesses must navigate the financial and operational challenges of coronavirus while rapidly addressing the needs of their people, customers and suppliers. By taking the right actions, supply chain leaders can turn massive complexity and supply chain disruption into meaningful change.

As they respond to both the immediate impacts of the pandemic and prepare for what comes next, a continuous cycle of risk mobilizing, sensing, analysis, configuration, and operation will help to optimize results and mitigate risks:

Chart describing how a continuous cycle of risk mobilizing, sensing, analysis, configuration, and operation can help optimize results and mitigate risks while dealing with the pandemic and preparing for the future.

The COVID-19 pandemic is not just a short-term crisis. It has long-lasting implications for how people work and how supply chains function. There is a pressing need for businesses to build long-term resilience in their value chains for managing future challenges.

This requires holistic approaches to manage the supply chain. Companies must build in sufficient flexibility to protect against future disruptions. They should also consider developing a robust framework that includes a responsive and resilient risk management operations capability.

That capability should be technology-led, leveraging platforms that support applied analytics, artificial intelligence and machine learning. It should also ensure end-to-end transparency across the supply chain. In the long-term, risk response will need to become an integral part of business-as-usual protocols.

Supply chain planning

The unprecedented supply chain disruption caused by COVID-19 has had severe operational and financial consequences, with planners having to address issues including:

  • demand drops and surges by segment
  • supply shortages
  • inventory placement challenges and
  • reduced productivity.

To further complicate the challenge, planners during the pandemic have been unable to rely on the steady-state models at the heart of most existing planning systems. Instead, they’ve played a vital role by making decisions based on real-time information, acting as the “nerve center” for the flow of supply chain data.

What’s now? Five supply chain priorities for immediate action

Chart outlining the five supply chain priorities for immediate action:1.  Put People First, 2. Leverage Data to improve visibility, 3. Define Segmentation to prioritize demand, 4. Build a Sales and Ops Swat Team, 5. Evaluate Supply Chain Scenarios.
  1. Put people first: Keep the planning workforce healthy and productive by supporting new ways of working.
  2. Leverage data to improve visibility: maximize visibility into demand, inventory, capacity, supply and finances across the ecosystem.
  3. Define segmentation to prioritize demand: carefully analyze demand and define priority micro-segments.
  4. Build a sales and ops SWAT team: mobilize dedicated planning and execution teams that are able to undertake multiple interventions and orchestrate responses effectively.
  5. Evaluate supply chain scenarios: run simulations to predict when and where excesses and shortages are likely to occur as well as running end-to-end scenarios to get actionable insights that will optimize operational metrics.

What’s next? Three key actions for supply chain planning from now on

Companies have an opportunity to use this challenging period to discover where investments are needed, evolve the supply chain planning function, and reposition the organization for growth once economies rebound. There are three key focus areas:

  1. Evolve digital to unlock data
  2. Rethink the operating model
  3. Build an asset-light network.

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