The COVID-19 pandemic is spreading at an extraordinary speed. As a company, you probably have put a crisis team in place and are doing all you can to keep your people safe and stay on top of your business. You deal with the uncertainty amid constant disruption. Close on the heels of the coronavirus outbreak, the biggest economic shock since World War II is headed our way. And it isn’t just an economic shock: it is a shock to customer behaviour and business models too.
Extreme level of uncertainty
The challenges associated with it will be orders of magnitude bigger than what we are used to dealing with. To handle them, you need to adopt an operating model that accommodates the extreme disruptive level of uncertainty facing your business. If you have not already done so, it is time to put together a team tha plans ahead. The plan-ahead team will help elevate your view above the day-to-day response that your crisis team is managing. Its objective is to enable modular, scalable thinking that any Supply Chain Manager needs to navigate this unprecedented and rapidly evolving situation.
Adapting to the new normal
Traditionally, Supply Chain Managers consider the cost, quality and delivery as their key metrics when developing Supply Chain strategies. But as the crisis has shown, major global events caused by pandemics such as COVID-19, as well as natural disasters, climate change and geopolitical tensions, can create significant disruption to the reliable supply of parts or products.
Supply Chains cannot be established overnight. It takes time and effort to qualify potential suppliers in areas of manufacturing quality, capacity, delivery, cost and their ability to respond to engineering or demand changes. Thus, Supply Chains are designed for longer-term needs. Once they are established, it can be difficult to change them quickly to adapt to unpredictable disruptions.
Supply Chain KPI’s are changing
The COVID-19 pandemic has reminded corporate decision-makers that there is a need to develop new business strategies in their future supply chain designs. The KPIs to be considered for future Supply Chain designs likely will contain both traditional metrics such as cost, quality and delivery, and new performance measures including resilience, responsiveness and reconfigurability.
The understanding of supply-chain risk will be changed forever. Too much risk has accumulated in the global supply chains that has left no room in dealing with disruption. The balance of low cost and flexibility needs realignment. Supply-chain strategy development and execution will be sought-after skills. Thinking beyond the smooth flow of products and services needs much more focus on risk and corporate responsibility.
According to a recent study from Accenture – 94% of Fortune 1000 companies are seeing supply chain disruptions from COVID-19. 75% of companies have had negative or strongly negative impacts on their businesses. 55% plan to downgrade their growth outlooks (or have already done so).
The use of digital twins will increase
Given that Supply Chains need to be redesigned to treat disruptions as the norm, detect early warnings and be able to sense and pivot seamlessly to offset situations like the ones mentioned we believe that the use of digital twins will increase. Organizations can use them to create business process simulations that can be updated in real time as circumstances change. For example, this could include finding the best way to shift production to alternate locations, move inventory to different warehouses, increase or decrease safety stocks and be better prepared overall.