A PANDEMIC DISRUPTION: The Future of Supply Chains in the Post-COVID Era

COVID-19: the inevitable repercussions

The COVID-19 pandemic has impacted every industry around the globe in never before seen ways. Forcing governments and authorities to take drastic measures in order to control the spread of the virus, such as lockdowns and restrictions on the movement of people and goods. Significant reductions of demand can be seen in industries such as fashion and electronics, whereas some other categories such as personal hygiene products have experienced unforeseen levels of demand.

This has inevitably affected global supply chains and has forced companies to adapt their planning and operations to address these impacts. According to a survey conducted by the Institute for Supply Management, in early March more than 80% of the companies involved believed their organization would be impacted by COVID-19 disruptions; by the end of March, this increased to 95%.

CHALLENGES FACING GLOBAL SUPPLY CHAINS

1) Lockdowns and social distancing: COVID-19 is challenging logistics operations and retailers in terms of their ability to maintain service levels to customers while at the same time implementing new security/sanitation requirements necessary due to social distancing.

• New restrictions and safety requirements limiting presences in the workplace.
• Store closures and the need to rethink future store designs.
• Temporary factory closures leading to production shortages.

2) Restrictions on the movement of goods: The global movement of goods has been greatly disrupted by COVID-19: causing transit halts across many industries and their supply chains, creating delays and an urgency to re-plan arrivals in near real-time.

• Due to a shortage of (air and freight) transport options, average lead times for operations have doubled globally: in Asia (222% for China, 217% for Korea, and 209% for Japan), Europe (201%) and U.S. (200%). (Source: Institute for Supply Management)
• Need to re-prioritise inbound and outbound transits to meet urgent requirements.

3) Changes in Demand : The COVID-19 crisis has significantly affected consumer purchases. During lockdowns, consumers often stocked up on essential goods because of shortage fears or health and safety concerns. While in Phase 2, remote working, declining consumer purchasing power/confidence and safety measures have caused major declines in demand for certain products and services.

• Increase in demand for essential goods such as food and grocery, pharmaceuticals and hygiene products.
• Decrease in demand for fashion and electronics especially via traditional (brick-and-mortar) channels.
• Some companies are converting their production to meet demand for personal protection equipment and medical supplies.

4) Rise in Importance of the e-Commerce channel: In the past months the most evident change in consumer behavior has been the shift from in-person purchases to e-commerce. Movement restrictions, long queues and closures of physical stores have lowered many of the adoption barriers and pushed people to try e-commerce channels.

• Meeting the customer where they are: change is seen in the retail world and in consumer behaviours, accelerating the rise of e-commerce over physical stores. This is already evident in the essential goods market, where online grocery shopping has seen booms of orders growing by 200-300% compared to the same time period last year. (Source: Rakuten Intelligence)
• Rethinking fulfilment options and (contactless) delivery methods.

SOLUTIONS TO REACT TO THE IMMEDIATE NEEDS AND PREPARE FOR THE FUTURE

REORGANISATION OF THE WORKPLACE

With new social distancing restrictions imposing a need to limit presences, the reorganisation of the workplace is essential to ensure the safety of employees and allow activities to restart in full-force.

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PRIORITISING THE ARRIVAL OF URGENT GOODS

In order to mitigate the impact of disruptions from upstream suppliers providing components and raw materials and maintain production levels, it is key to have the ability to re-plan arrivals in near real-time.

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VISIBILITY TO RESPOND QUICKLY TO CHANGES

In these scenarios, having real-time data along the touchpoints of the supply chain and making sense of it will be fundamental.

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MEETING THE CUSTOMER WHERE THEY ARE WITH DEDICATED E-COMMERCE SOLUTIONS

With the huge rise in demand for online grocery, most grocery retailers found themselves unprepared to meet the overwhelming amount of orders, showing limits in the speed of order picking and delivery capacity; while some smaller chains did not offer these types of service at all.

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THE TIME FOR ACTION

So what will happen after the immediate crisis ends? When and how will factories, stores and warehouses re-open? Will the shift in consumer buying behaviours continue post-pandemic? What will the “new normal” look like and how will companies and consumers adapt?

While there’s no definite answer to these questions, the Coronavirus has highlighted the need to rethink traditional supply chain models by accelerating digital transformation and adopting tech-led business models to deal with the needs of this “new normal” as well as prepare for future crises. Agility is key, in the face of unforeseen market challenges and opportunities. Where logistics and IT processes have traditionally been behind the scenes, the COVID-19 crisis has brought them front and centre; and there is a huge opportunity now for logistics and IT managers to show the robustness of their operations and IT architectures to ensure the survival of their supply chains and thus the business.

The LEA Reply^TM Platform is founded on the principles of agility and adaptability, thanks to its microservice-based architecture, which allows solutions to be quickly adapted or developed to meet specific customer needs. Additionally LEA’s open API framework facilitates the adoption of new technologies such as IoT, blockchain, AI, control towers and autonomous devices like AGVs and drones, which are set to accelerate more than ever. The role of logistics professionals in the next phase is far from over: now more than ever we need them to accompany us in the next delicate passages of the return to normal, or at least the new version of it.