There are few events in modern memory which have rattled the global supply chain quite like the COVID-19 pandemic. From rapid fluctuations in consumer demand to raw material shortages, the COVID-19 pandemic was a massive disruptor of the global supply chain, impacting both businesses and consumers. Now, with the pandemic behind us, we can use the lessons learned from the COVID-19 crisis to understand how to strengthen our supply chains, reinforce deficiencies, and improve supply chain resilience in the future.
Here are some of the biggest challenges the supply chain faced during the COVID-19 pandemic, the lessons learned from them, and how those takeaways can be used to improve supply chain resilience.
How COVID-19 Impacted the Supply Chain
While the impacts of COVID-19 pandemic on the supply chain might still be fresh in your mind, it’s important to recall how significant (and diverse) they were, in order to properly strengthen supply chain resilience in the future.
To briefly summarize, during the COVID-19 pandemic, some of the key disruptions for inventory-based businesses included:
- Production struggles: Factory closures, labor shortages, and strict lockdown measures greatly slowed, delayed, and even halted production of goods all over the world. This led to shortages of both critical components and finished goods.
- Logistics challenges: Port congestion, shipping delays, and even a widespread shipping container shortage led to unprecedented challenges in transporting goods. Additionally, as consumers increasingly shopped from home during lockdown measures, there were surges in demand for e-commerce, which exacerbated these issues.
- Demand whiplash: Consumer behavior was unpredictable and shifted dramatically during the pandemic, with demand suddenly plummeting for certain products, and surging for others (such as home office equipment and cleaning supplies). This “demand whiplash” was difficult for inventory-based businesses to keep up with, and led to different issues. For example, as consumers rushed to stock up on masks and gloves, hospitals faced shortages.
- Economic uncertainty: The impacts of the pandemic led to the “largest global economic crisis in more than a century,” leading to high numbers of temporary unemployment and income loss. This subsequently led to less spending for consumers, less liquid cash for businesses, and all-around economic uncertainty in the supply chain.
Now, years after the pandemic, these impacts and challenges have subsided, and supply chains were able to recover from the pandemic. But with these lessons still fresh, businesses in the supply chain are focused on supply chain resilience, in the interest of reducing the fragility of the supply chain and preparing for the unpredictable.
Key Lessons Learned (and How To Use Them To Improve Resilience)
Here are the key lessons learned from the COVID-19 pandemic, and how they can be used today and in the future to improve supply chain resilience.
1. Diversification is crucial
The COVID-19 pandemic underscored the risks of overly-concentrated supply chains, where businesses rely on a single supplier, or suppliers in a single geographic region, which can leave them vulnerable to disruptions. To mitigate these risks, supply chain businesses should consider using multiple suppliers across different geographic locations, and have alternative suppliers in mind in case there is a disruption.
2. Proper demand forecasting is needed
The COVID-19 crisis also exposed the complexities of inventory management, and the consequences of inventory mismanagement. Remember: the sudden shifts in demand led to stockouts, excess inventory, and increased costs. To build more resilient supply chains, businesses must focus on improving their demand forecasting, to best plan for future scenarios. Today’s advanced demand planning tools give you the most accurate forecasts possible, and take unexpected events into account, including promotions, new clients, and even natural disasters. Ultimately, while it’s impossible to predict every uncertain event, accurate demand forecasting allows you to be as prepared as possible.
3. Digital transformation makes a big difference
There are many recent advancements in supply chain technology, but as it turns out, many businesses are slow to adopt and deploy this tech. For example, one study found that as many as 80% of warehouses are lacking automation technology, while only 10% are utilizing advanced automation technologies. But one of the key takeaways of the COVID-19 pandemic was how digital transformation can be used to enhance supply chain visibility, agility, and resilience.
For example, digital solutions provide warehouses with real-time insights into supplier performance, inventory levels, transportation routes and status’, and production processes. This visibility allows decision-makers to proactively respond to disruptions or changing needs, and generally improves decision-making, particularly when this data is cross-referenced with demand forecasts.
There are several other ways digital transformation enhances supply chain resilience, such as with data analytics and inventory analysis, which can uncover valuable patterns and insights within supply chain data. Additionally, inventory optimization software offers organizations a centralized view of their supply chain operations, and provides leaders with advanced insights, tools, and analysis, to support comprehensive monitoring and decision-making.
4. Robust risk assessment and management is needed
The pandemic highlighted the critical importance of ongoing risk assessment and management. By proactively identifying, assessing, and mitigating potential risks, businesses can build more resilient supply chains. For example, businesses should regularly self-evaluate their supply chain for vulnerabilities. This involves identifying potential disruptions, bottlenecks, and vendor risks. Also, inventory-based businesses should develop detailed contingency plans for various scenarios, which might include plans for alternative suppliers, production facilities, transportation routes, and distribution channels, to minimize the impacts of disruptions.
5. Collaboration is key
Strong relationships with both suppliers and customers are essential for building a resilient supply chain, because these relationships can help you better navigate challenges, share risks, and create opportunities for growth. To build strong relationships, leaders should practice open communication, joint planning, and information sharing, to help build trust and deepen partnerships.
Also, share data and insights with suppliers and customers (such as demand forecasts) to keep everyone in the loop about what’s going on, to develop trust, and foster collaboration. Think about it like this: if a key supplier knows that you’re expecting a busy few months, they can better prepare their own operations, instead of being caught off-guard.
The COVID-19 pandemic served as a stark wake-up call for businesses worldwide, but particularly for those in the supply chain, because it exposed many vulnerabilities in the traditional supply chain model and processes. By carefully analyzing the lessons learned from this crisis, inventory-based businesses can enhance their supply chain resilience, and minimize the impact of future disruptions.
StockIQ: Your Partner in Supply Chain Resilience
The pandemic showed us the importance of supply chain resilience, but it’s not the only instance where it’s essential. Supply chain resilience is essential for any inventory-based business which wants to thrive in a perpetually uncertain ecosystem. If you’re ready to improve supply chain resilience and visibility, control inventory, simplify ordering, and improve forecasting, then StockIQ is what you’re looking for.
StockIQ is an advanced, user-friendly supply chain management software, which allows you to unlock the power of streamlined supply chain management. Interested in learning more? Contact us today, or request a StockIQ demo.
