Well the last few months have been an absolute roller coaster with the COVID-19 pandemic. This is having a massive and significant impact on almost every organisation and industry around the world. For businesses with global supply chains this is not the first global disruption that has had an impact, with SARS hitting in 2003 and the Fukushima nuclear disaster in 2011. Businesses should have had a supply chain contingency and risk plans in order, except this time the disruption we have experienced has never ever been seen before.
The majority of organisations in the UK are relatively well positioned to deal with and manage short-term disruptions but with the on-going impact in China, supply chain shortages may mean some companies may not be able to recover from this crisis. The supply chain network is becoming ever more complex and it is not quite as easy to plan for contingencies, so the risks become higher and businesses become more vulnerable. Every business needs to ensure that these are prioritised to ensure the safety of their businesses.
We have seen the huge impact that COVID-19 has had on businesses, none more so than global Life Sciences supply chains who have struggled with the low availability of PPE to protect our front line NHS and key workers. In the background there have been less obvious impacts on generic drug producers who source ingredients from China.
Businesses as a whole will begin to see a shift in their demands with increasing shortages of materials coming from severely impacted areas and issues with various transport networks. Even as we start to see lockdowns lifted and productivity returning to normal, the focus will initially be on domestic consumption before the servicing of world supply goes back to normal.
Due to free trade and advances in technology all sectors of business have been extending their geographical reach, influence and growing opportunities for developing global supply chains to meet the changing demands and requirements of the global customer base. Although this is a positive and the area has growth exponentially over the past few decades the inherent supply chain risks have mainly been ignored.
With this growth it means that there are more and more parties involved in ensuring sourcing and delivery including; logistics providers, software and infrastructure technology providers, finance, customs, compliance and shipping lines. Each supply chain is a complex ecosystem of multiple tier customers and suppliers with each tier connected to the other. Let us not forget the physical logistical infrastructures too, road, rail and ships that connect these hubs together, which in themselves currently can bring difficulties and delays to reaching the end destination.
Supply chain management risk.
There are a number of factors that can affect supply chain management from demand or supply, to issues within the business and the environment, for example COVID-19 or a local issue like adverse weather conditions. These problems can upset the flow of the supply chain which means that;
- there are a variety of risks in the end-to-end supply chain
- the characteristics in terms of probability and severity are highly variable
- the risk will be sensitive to the context of the business, the industry and its position in the chain the permutations and combinations of risk are such that few generalisations can apply.
Finding and assessing risk areas of a business may be a very difficult task but not a pointless endeavour. An obvious risk can be managed and minimalised and even, in some cases, eliminated. It is the unseen risks that are far more dangerous to businesses because usually the severity can only be assessed after it has hit COVID-19. External business risks are much greater than internal ones as you know less about them.
Considerations if your business has been affected by COVID-19
- Make sure you understand the risk across your supply chain ecosystem especially where your manufacturing and distribution is effected through China and India.
- Look at your supplier location and supplier sourcing policies and the supply chain operation.
- Monitor the performance of the supply chain end-to-end against plan in-order to quickly identify out of tolerance events for action to be taken.
- Review current KPIs for the supply chain to make sure they are aligned across organisational boundaries and look to include new performance measures such as resilience, responsiveness and reconfigurability.
- Use this current situation as a case study to review and identify opportunities to build resilience and reduce risk. These lessons will be applicable not only to pandemics but any significant global events or disruptions in the future,
- Take time to review current stock levels and assess if stock levels need to be increased given the supply chain interruption/non supply
- Review current warehouse operation and the need to improve/increase storage equipment such as Pallet Racking, Shelving Systems and Mezzanine Floors to accommodate increased product range