The impact of COVID-19 on the supply chain in APAC
As the COVID-19 lockdown begins to ease in many parts of the world and we emerge mole-like from our WFH burrows, we are bombarded by marketing campaigns and thought leaders who tell us we should prepare for the ‘new normal’.
But what exactly is the new normal and how does it compare with the old normal? And what will we need to do to capture the opportunities that are so loudly (and vaguely) touted wherever we look?
Undoubtedly, there are some things that have changed and may never go back to the way things were. Business travel could be permanently impacted now that we’ve realised that team Blue Jeans Zoom actually works quite well and that we can talk to people quite effectively using technology rather than stamping our carbon footprints on the environment. It is possible that many organisations will never look at the office space in the same way again and we will get to enjoy a duvet desk more often in the future.
However, for supply chain professionals around the world, what has really changed? Once we stop having daily crisis meetings and we have the opportunity to pause for thought, what has the result of COVID-19 been?
Nothing. That’s right, nothing. Stop and think about it for a minute. What new technology, process or policy has actually changed since January 2020?
The fact is, whatever you were struggling with before COVID, you will be right back to after COVID. What the virus has highlighted, in many ways, is just how deficient many organisations’ supply chains actually are.
The number of organisations that introduced daily crisis meetings to re-balance supply and demand is staggering. What were you doing before that? Letting supply and demand changes just happen and hope that it would all come out right by the end of the month? Sure, the scale of change was huge, but the point is, many organisations didn’t even have the basics in place to effectively manage changes in supply and demand and therefore had to scramble to invent something on the fly - never a good recipe for efficient and effective process design.
As a result of the pandemic, we are being exhorted to reshore our manufacturing plants, add redundancy and risk mitigation in the supply chain. Excellent. Isn’t that part of the remit of supply chain anyway? Surely, all we have to do is dust off the current risk mitigation plans and get on with it. However, the reason many organisations have dust on these types of plans is because the business case didn’t stack up. “Come out of China and move to Texas? Sure, let’s do it. Hang on, HOW MUCH?”
The truth is, many organisations are going to be faced with the need to review their supply chain network in an environment where additional investment is going to be hard to get. If the business case was difficult in ‘normal’ times, just imagine how much harder it will be to justify any changes when money is too tight to mention. All the statements that 2021 will be the ‘year of supply chain’ or that you will now have the opportunity to invest in new technology or build secondary manufacturing plants to solve all your problems is a pipe dream.
If you are in an industry that has done well from the pandemic (e.g. PPE suppliers), you may think that the extra profits can be ploughed back into supply chain reorganisation. Think again. Many medical device manufacturers are scaling back their plans for 2021 because health care organisations have overspent their budgets already and will be scaling back budgets next year.
So, what about the future?
Many businesses have temporarily suspended their S&OP/IBP planning processes or shortened the horizon in order to focus on the here and now. This is a potentially fatal mistake. It is imperative that these businesses get back to long term planning because, in a world of restricted budgets and cashflow, an organisation must be aligned around one set of priorities and a unified plan. You cannot afford to be pulling in different directions and burning through profits and cash on schemes that will not deliver benefits to the business in the longer term. If you have curtailed your S&OP/IBP process, restart it without delay, you cannot afford to wait. If you don’t have an effective S&OP/IBP process, get one. Now. Without it, you are going to fail.
But it’s not all doom and gloom. Supply chain professionals have always been inventive and been genius at problem solving. Now is a great opportunity to show your business what you can do and how you can add value, even in tough financial and political times.
New normal is just like the old normal - Supply chain leaders have always had to consider risk, flexibility, robustness, footprint, talent and new technology. The pandemic has highlighted just how many organisations have fallen asleep at the wheel regarding the above. What will be different is that we will be trying to correct or implement our processes and supply chain configurations in a recession that may last for a decade, with all the restrictions related to investment and financial performance. That won’t be easy and will require supply chain ingenuity, political decisions and prioritisation of investment from company boards.
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