Key Supply Chain Lessons Learned in 2020

With COVID-19 taking an unrelenting toll on human life, livelihoods, and business in 2020, the supply chain found itself under an especially bright spotlight. Forced to reckon with age-old manufacturing and distribution issues that were chugging along just fine prior to the global pandemic, companies are now looking back on the last 10 months and asking themselves what they would have done differently and how they can prepare for a more agile, resilient future.

So, What Went Wrong?

For starters, it looks like supply chains weren’t really as agile or resilient as we assumed. For supply chains to function at their best, there needs to be more flexibility and agility, both of which help them respond to changes within short notice.

“As we have seen in recent times, unforeseen events do occur. With agility, companies can prove they can cope with natural disasters or pandemics,” Manufacturing.net points out. “An agile supply chain can also help you navigate scarcity and disruption. Supply chain managers can predict and identify potential problems and solutions. Thus, they can respond to disruptions in production, supply, and delivery more swiftly.”

The pandemic also taught companies that crises can occur in unexpected ways, and that their supply chains can easily be exposed to unimagined vulnerabilities that can surface quickly. Fortunately, technology has advanced to a point where it can play a leading role in helping companies through VUCA (volatility, uncertainty, complexity, ambiguity) environments and events. 

“To mitigate the impact of supply chain disruptions, companies will need a digital supply chain that unifies all the systems, applications, processes, and information in the supply chain, connecting all stakeholders on a single digital platform — which makes it an essential platform for managing a supply chain crisis,” Mark Burstein writes in Retail Info Systems. “It can be utilized for demand planning and forecasting, postponement techniques, vendor management and sourcing, omnichannel inventory visibility, and much more.”

Flexibility and Adaptability Always Beat Rigidity

Any company that was “stuck in its old ways of doing things” got a quick wake-up call in March of 2020, when the global pandemic turned most stagnant, ancient business models on end. During the panic-buying phase, some shippers engaged more in the institutional production of food, beverages, and other consumables were having trouble crossing over to package and deliver goods into the retail supply chain, according to FreightWaves. 

Similarly, when restaurants, schools and hospitals stopped buying from food distributors, many institutional suppliers weren’t able to quickly transition into the retail supply chain by repackaging what were previously bulk quantities into consumer packaging and portions. “Farmers, for example, who sold to wholesalers and distributors had very little reaction time to develop retail sales relationships and supply chains before their food spoiled in the field,” FreightWaves continues. “Fresh milk was no longer being sold into schools and cheese producers could not handle the additional milk intake, causing dairy farmers to dispose of milk that could not be used. Cold storage inventories spiked, causing space to be both scarce and expensive.”

Upon emerging from the early stages of the pandemic, organizations realized that flexibility and adaptability beat rigidity any day (just asked the multitude of distilleries that quickly pivoted over to making hand sanitizer early in the pandemic). “By far, the most important takeaway from the pandemic is the need for companies to build flexibility into their organizations that can help them react and adjust to short-term supply chain disruptions,” Victoria Kickham writes in Supply Chain Quarterly. “For the longer-term, companies should focus on adapting to any permanent changes that result from those disruptions.” 

Kickham also notes that continuity planning is no longer a nice-to-have; it’s now a must-have. “The pandemic exposed many weaknesses, including a lack of attention to risk management and business continuity planning. Moving forward, organizations must develop a sharper focus on this discipline.” 

For a business continuity plan to pack the biggest punch, Spend Matters tells companies to view their supply chains through the lens of these three priorities: 

• How are you going to ensure continuity of production and fulfillment when faced with supply and demand issues? Do you have an alternate supplier base standing by?
• Are you in a good position to maintain the flow of information? Are you embracing digital channels, collaboration technologies, and paperless workflows?
• How do you foster employee health and wellbeing? Are there redundancies in place to keep the business running when labor is in short supply? Can you deliver contactless service? 

A Renewed Focus on Supply Chain Reshoring and Onshoring

COVID-19 caused severe supply chain bottlenecks, exposing just how overleveraged North American companies are in their off-continent sourcing relationships, FreightWaves explains. To be better prepared for disruptions like COVID-19, businesses must rebalance inventories somewhere between just in time and just in case. 

“Manufacturers have recognized there is an overreliance on foreign vendors for production of critical components and assemblies in medical, pharmaceutical, and high-tech and are considering reshoring these to maintain better control over supplies,” ENERGY Transportation Group’s Jason Ickert told FreightWaves. “While decoupling completely from an overseas supply chain may be impossible, reshoring what makes business sense, and removing additional links in the supply chain, is the new focus.”