Turbulence ahead for Global Supply Chains

April 24, 2020

Global supply chain disruption – The Coronavirus Impact

The vulnerability of supply chains is never more apparent than in times of crisis. With the outbreak of the COVID-19 coronavirus pandemic, industries are navigating a new supply chain landscape with limited, and in some cases, zero predictability.

Pre-COVID-19, supply chains functioned efficiently based on relatively predictable supply and demand forecasting. Still, since the outbreak of the virus, industries are facing a new environment of instability to manage and maintain.

Empty shelvesFor example, the supply of essential items experienced an exceptional influx of demand. Quarantine, lockdown, and self-isolation periods instigated panic buying as COVID-19 spread from China into Europe, the United States of America, and, subsequently, all regions of the world. The increase in demand puts pressure on retailers to keep shelves stocked in stores and supermarkets.

Furthermore, the fashion industry, with its new spring season apparel ready to hit high street stores, experienced closures of outlets in addition to restrictions of movement of their consumers. Subsequently, apparel manufacturers and retailers became fervently more reliant on e-commerce; however, disruption to final mile distribution also became apparent as trucking and drivers became increasingly difficult to source.

However, it is not just the initial supply shock that has caused disruption and supply chain risk. Regular modes of transportation, such as air freight, are another example of how unpredictable circumstances have impacted supply chains due to the COVID-19 coronavirus pandemic.

Air Freight capacity reduction has caused immense challenges for the regular transportation of goods around the world. With grounded passenger planes and limited ‘belly-hold’ capacity, alternative transportation such as Rail Freight from China to Europe, as well as Intermodal Services and Cargo Charters, have seen an influx in demand.

Multiple supply chain disruptions are occurring in the space of a month, even the most resilient of supply chains, could not have forecasted such unprecedented circumstances.

What are the next challenges ahead for Supply Chains?

Air freight cargoAs supply chains adjust to the initial disruptions created by the outbreak of the COVID-19 coronavirus, additional challenges are beginning to emerge as the global crisis continues to develop around the world.

Consumer demand is now the question that troubles supply chain experts. In addition to business and store closures for indefinite periods, industries may also experience a reduction in consumer demand. Many homes face challenging times ahead due to labor uncertainty and reduction in household income.

Forecasting will inevitably be a challenge as unpredictable demand will dominate supply chain operations as will optimizing production and distribution capacity.
Scenario planning and analysis will undoubtedly be a valuable tool to understand both the financial and operational implications of any further disruption.

How to successfully prepare for future Supply Chain challenges?

During times of crisis and rapidly evolving circumstances, partnerships throughout the supply chain are imperative to maintain an agile and visible approach to fluctuating supply and demand. Are you prepared if another pandemic or a second wave of COVID-19 strikes? As your logistics partner, Crane Worldwide Logistics can support you with diversifying your solutions through warehouse capacity and flexible transportation measures.

As you begin to assess your future consumer demand, determine your current and future inventory requirements as well as forecast any influx in your supply, we can provide a flexible logistics approach to ensure your business continues to run effectively. Mitigating risks, we can provide support to you in the long term both now and in the future. How will you build supply chain resilience into your operations should a similar pandemic reoccur?

Supply Chain top priorities during and after the COVID-19 pandemic

Hau Lee, a professor of operations, information, and technology at Stanford Graduate School of Business, broke down the top priorities to overcome Supply Chain challenges. For most large manufacturers, globalized sourcing is here to stay; therefore, the big priority for companies is to increase their awareness about what’s happening throughout the supply chain.

  • What are the trends in trade agreements?
  • What kinds of risks — physical, political, financial — do suppliers at each level face?
  • What will be the repercussions for the rest of the chain if a key factory shuts down?
  • And what are the backup options?

A second priority is to build more flexibility into the production process (operational hedging). The best way to navigate these challenges is by having alternative sources.

The third priority, according to Lee, is to increase logistical flexibility. Investing in logistics can significantly expand a company’s options.

Moving forward, as stated by Professor Lee, companies and manufacturers looking o overcome global Supply Chain challenges should:

  • Look for options in advance.
  • Invest in flexibility.
  • Hedge like a bank does.

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