Supply chains have experienced risk due to COVID-19 and sought to adapt to the threat in numerous ways. With COVID-19 still a significant player in 2022, successfully navigating those risks will come down to innovation and determination.
Beyond the impact on tourism, health, and employment, COVD-19 has seriously impacted the automotive, retail, tech, and shipping industries.
Read some of the latest supply chain statistics to understand market conditions better to identify what steps to take to remain competitive.
In fact, according to Accenture.com, around 94% of fortune 500 companies are experiencing some level of supply disruption due to COVID-19.
The Reality of Supply Chain Disruption
With some industries still experiencing lockdown and others in the early stages of an economic restart, now is critical for industries to assess the impact of supply chain disruption to ensure that the supply of goods and services can be re-established securely and safely – and with minimal loss.
As 2020 demonstrated, supply chain disruption can happen quickly. Business managers and executives have had to respond rapidly to serve and satisfy their respective target markets. These decisions impact supply and those employed along the supply chain process.
Products once taken for granted, such as computer chips and paper, are in more demand due to the scarcity, cracks in the global supply chain, and labor shortages.
Unfortunately, when there is a greater need for a product or service, malicious actors rise to the occasion to commit fraud and exploit the situation for their own gain.
For example, fraudsters posing as genuine vendors for much-needed goods try to sell bogus products to desperate companies struggling to find vital components needed for their wares.
Businesses and consumers must learn how to protect themselves from financial fraud and take proactive steps to keep their private information from falling into the wrong hand.
Managing both the short and long-term impacts of supply chain disruption will enable businesses to rebuild their sector and allow their economies to rebound.
Responding to Supply Shocks
Supply shocks occur when there is any significant interruption to the availability of goods and services—the impact was tough on those who rely on goods from China.
Companies in the US and elsewhere were placed under enormous pressure to respond to these shocks in a way that protected their economies and enabled them to maintain a viable position in their respective markets.
Supply shock meant that businesses had to assess:
- The viability of production
- Provide analysis on manufacturing feasibility
- Manage consumer expectations and demand
The issue here was supply chain resilience. How should companies manage supply shocks and increase resilience to potential – and almost inevitable – future supply chain shocks. Resilience strategies that many companies considered were:
- Forecasting and highlighting supply vulnerabilities
- Managing employee culture and expectations
- Evaluate and re-organize procurement vulnerabilities
For many businesses, these supply shocks led to another type of shock not experienced before: Demand shocks.
These demand shocks included the stockpiling of essential and non-essential goods resulting from consumer perceptions developed through media reporting.
From toilet paper to food and seeds, many consumers increased their demands, in some instances, purchasing a month’s supply of single-use items in one day.
For some industries, such as food, these demand shocks were expected. For others, this was completely new territory.
Identifying the Major Risks
With supply chain disruption comes a shift in consumer behavior, further exacerbating an already complex marketplace condition and leading to more significant production stress.
It’s essential that businesses develop a model to manage those risks to the supply chain and manage those processes most likely to cause industry conflict and stress.
This means developing agility and flexibility in the integrated business planning process.
A lack of integrated business planning (IBP), which takes into consideration the financial, production, sales, marketing and deliverables of an enterprise, can expose a business to multiple risks.
While managing supply chain risk is not new, the level of complexity and disruption that occurred in 2020 and will continue for the foreseeable future has increased beyond what even experienced executives and management teams have experienced in our generation.
Here rapid response, analytical depth, and strategic planning are crucial if industries are to maintain cohesion and viability.
The most essential factors in managing the ongoing supply chain risk include:
- Rapid adaptation
- Supply chain software
- Sales Tracking Software
- Stress management strategies for stakeholders and employees
- A multi-faceted contingency planning process
- Flexible procurement and manufacturing strategies
- Monitoring and process optimization
Areas of typical concern will be:
- Impact on the rise and fall of demand
- Insufficient supply
- Lowered productivity
- Inventory management
These processes will all have economic costs that vary according to industry. So a full-orbed approach to integrated business planning will need to factor in financial constraints, marketing, warehousing, transport, manufacturing, and production planning.
Industry cannot simply rely on crisis modeling from within the health sector. To develop resilience, businesses must build their own modeling based on current market research within their industry.
On top of that, the industry will need to manage and monitor the internal constraints, including seasonal factors and skilled workforce availability.
Strategies for Managing Human Resources
The issue of skilled labor should not be overlooked during periods of supply chain disruption. Ultimately, people, not machines, bring products and services to market, and unless those human resources are appropriately managed, abundance and scarcity cease to matter.
The US, along with Australia, depends on a large contingency of migrant and seasonal workers.
Business needs to manage those and their ordinary staff with greater sensitivity and long-term focus on overall sector productivity and well-being.
With the right approach, your industry can utilize the motivation of employees to:
- Develop strategies for supply chain disruption
- Involve workers in contingency planning, change management, and company culture
- Develop effective communication strategies to bolster resilience
- Manage workplace crisis and provide effective intervention
For example, The US farming community depends on a workforce that is 7 percent migrants. This means that for supply chain risk to be managed from a human resource point of view, a business will need to develop diverse approaches to communication, incentive, and employee health to maintain beneficial long-term economic outcomes sustainability.
Lockdowns, ill-health, and workplace stress will all play a part in the success of any given sector caught up in the resulting supply chain disruptions that are likely to continue due to COVD-19.
How employers respond to workplace relationships and human resource issues can now determine their position in the workforce, for good or ill, very quickly.
The most significant human resource challenges that industry will face as a result of increased supply chain disruption include:
- Disruption to mobility and a relocation workforce
- Employee despondence
- Increased workplace incidents and accidents due to stress
The supply chain impacts are obvious and include changes to grower and primary producer activity, planting, harvesting, and the inability to get produce to market due to transport and border restrictions.
Crop rotations are further impacted by seed production and disruptions to maintenance due to an unavailable workforce.
The impact includes culling animals, destroying crops, and the massive costs of reinvesting in alternative crops and farming practices to remain viable.
Even with the best-integrated business and process planning, the likelihood of increased prices, especially given the rise in inflation, food shortages, and demand shock remains high.
Management and key decision-makers can help alleviate the impacts by:
- Putting the well-being of employees first
- Having a precise and honest analysis of capacity, inventory, and financial position across the companies ecosystem
- Prioritizing the most resilient systems now and developing processes to increase resilience for the future
- Establishing a dedicated team whose focus is planning and conducting multiple SWAT analyses across company sectors
- Developing and evaluating scenarios across supply chain affected areas of the business ecosystem
A continuous cycle of risk analysis and response will help in terms of human resource management, fiscal viability and help strengthen your overall integrated business plan.
Finding the Hidden Risks
In the science and technology sector, the increase in sophistication and complexity has bought new problems to those in manufacturing.
Your typical car mechanic or body detailer is not in the business of creating voice-controlled auto-technology.
Those managing production are unlikely to be in a position to step up and solve the manufacturing disruptions that could bring the entire manufacturing process to a halt.
By way of example, a car or even a telephone from 50 years ago required fewer manufacturing components to bring it to market.
To effectively manage and plan for supply chain disruption, each component and step of the manufacturing process needs to have multiple contingency plans and fast response strategies when supplies are disrupted.
It’s also going to need a detailed financial plan to assess the impact on any disruption to single-component items.
Hidden risks that will need to be re-evaluated may also include a more vulnerable workforce in terms of physical and emotional well-being, capital outlays for new equipment or machinery, and the cost of implementing an entirely new business model.
Mitigating Future Supply Shock
As a short-term measure, companies can be working with existing suppliers in order to develop continuity. Discontinuity needs to go beyond the supply chain and include continuity of healthy business-to-business relationships.
At the same time, companies should be thinking about diversification regarding their current supply chain and ensure they have sufficient safeguards in place.
They should be looking to develop relationships for the purpose of procurement in other regions not affected by the current disruption.
In the retail sector, supply chain flexibility is critical. The impact of supply chain disruption on the retail industry is often sudden, and the results are devastating. During a supply chain crisis, businesses can shut down overnight, never to reopen.
Among the most significant areas of concern for the retail sector are proper financial management and contingency planning.
Staffing, stock levels, and product scope are also critical factors in retail business planning and management.
Retailers are also more vulnerable to demand shock than other industries. As the repeated lockdowns and the subsequent impact of a shifting workforce have shown, the retail sector may find it difficult or even impossible to operate at all.
Retailers will need to focus on minimizing the damage that these risks bring and maximizing opportunities to diversify deliverability.
The internet has provided some promise to retailers. But here, new complexities emerge, not least of which is competition for much larger retail entities.
Despite the risks associated with supply chain disruption, retailers do have some flexibility. With emergent technologies online, retailers can quickly fulfill consumer demand where product exists through fast-entry eCommerce options.
For example, eCommerce businesses can utilize artificial intelligence (AI) for greater stability in supply chains. AI solutions can significantly reduce error rates, decrease costs, and optimize supply chain flow.
As numerous retail businesses and several suitably positioned service industries have shown, just as the workforce can quickly be relocated to the home office, so too can moving online quickly save the enterprise.
Likewise, the food industry has shown that it too can exercise some creative flexibility, mitigate against closures, and even reach new markets through pick-up and delivery services.
For such strategies to be effective, each industry should consider the impact of changing its current business model in terms of both financial and human resource management.
New costs need to be factored into the model while other expenses can be reduced or removed altogether. Staff costs involved in retraining need to be considered, and staff culture and adaptation strategies need to be carefully developed to minimize the disruption.
It may be tempting to avoid any long-term thinking to manage the initial shock to supply chains in such circumstances.
But long-term planning should not be set aside. Some of the financial and human costs associated with COVID-19 are still a long way off.
A business that plans to survive will need to simultaneously monitor global and regional conditions and those specific to their industry.
No sector is immune to supply chain vulnerabilities. Whether you are a tech company relying on the supply of electricity, a transport business relying on fuel, or a hair salon relying on open doors and products to sell, all industries are now experiencing the challenges of supply chain disruption.
Rarely have the circumstances for supply-chain leaders been more complex than they have during the COVID-19 pandemic.
The reality is that not every business will survive. But the converse is also true. A good number of those affected can survive if they take the process of supply chain management seriously and develop realistic plans to manage the shock, minimize the damage, and build resilience into future planning.
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