COVID-19 forcing shippers to profoundly re-assess their supply chains
COVID-19 is forcing shippers around the world to reevaluate and resilience-test their supply chains to a much deeper level, along with the adoption of greater levels of supply chain diversification, innovation and long-term planning, according to the latest report by DHL’s supply chain risk management platform Resilience 360 published yesterday.
The report, entitled, COVID-19: The Future of Supply Chain and based on the findings of a recent survey from The Business Continuity Institute (BCI), revealed that fewer than half of organisations (49.5%) reported having a plan in place that sufficiently covered them for the supply chain issues encountered during the pandemic.
However, the difficulties that arose as a result of not having sufficient plans in place have prompted many organisations to change their supply chain planning going forward: 53.2% plan to write a comprehensive pandemic plan, and a further 32.3% will adapt current plans to ensure they cover supply chain issues in enough depth.
Supply and demand were affected badly during the pandemic but there were still some positive developments, the report noted.
Nearly three quarters of organisations (73%) encountered some or significant detrimental effect on the supply side, with 64.8% reporting the same on the demand side. One in five organisations, however, reported an increased demand for their products and services.
IT, telecommunications and pharmaceutical organisations, for example, noticed an increased demand, whereas other organisations launched new products and services geared to catering for differing customer needs during the pandemic.
The report went on to highlight that the pandemic has caused many organisations to carry out due diligence deeper in their supply chains going forward.
“Although organisations had largely carried out good levels of due diligence – such as determining suppliers’ location and obtaining business continuity plans – amongst their tier 1 supplier base, such due diligence started to tail off beyond tier 2,” it noted.
“The pandemic caused disruptions to many organisations’ supply chains beyond tier 1: many European based manufacturers, for example, are heavily reliant on Asia for components which caused issues for many organisations’ tier 1 suppliers. As a result, nearly two-thirds of organisations plan to perform deeper due diligence going forward.
“Good practice suggests that such due diligence should happen pre-contract phase so organisations can be aware of any potential issues – such as over-reliance on a particular geography – before engaging a supplier.”
The report also underlined that more organisations are using technology to help them perform the required due diligence, noting: “There has been a discernible increase in the use of technology during the pandemic to help with supply chain planning and strategy: 57.1% of organisations are using their own internal systems and spreadsheets for supply chain mapping, whilst 13.5% are using specialist tools – a notable uptick on the 22.6% recorded in the BCI Supply Chain Resilience 2019 report. Furthermore, of those who are not currently using tools, a fifth are now considering purchasing a specialist tool.”
Diversifying supplier base
The report also revealed that more than half of organisations intend to diversify their supplier base post-pandemic, with the Far East set to become the biggest casualty: 57.2% of respondents are looking to diversify their supplier base post-COVID-19 and, for many organisations, this means reducing their reliance on the Far East. Almost three in ten organisations (29.9%) will source less from the Far East, with a further 13.2% sourcing less from China.
Finally, it noted that local sourcing will become more mainstream, with two-thirds of organisations (66.2%) planning to source goods more locally post-pandemic, with a fifth (20.8%) reporting they will move a considerable number of suppliers more locally.
Although a further fifth will be engaging in more stockpiling post-pandemic, many are using local sourcing as a more cost-effective way of ensuring goods can be acquired quickly and efficiently.
BCI’s head of thought leadership, Rachael Elliott commented: “With three out of four organisations reporting their supply chains have been adversely affected by COVID-19, this report serves as a timely overview of the issues organisations have suffered throughout the pandemic. It serves as a benchmark to organisations, but also offers suggestions on measures organizations could consider implementing into their future supply chain strategies to help similar issues reoccurring in the face of a second wave or future global crisis.
“Whilst the pandemic continues to wreak havoc with supply chains globally, it has also brought opportunity: many organisations are already actively investing in new technologies to help with activities such as supply chain mapping, whilst others have developed cross functional teams – which they plan to keep post-COVID – to work together to help combat supply chain issues in a more organisationally cohesive way.”