Jan 5, 2021 | Industry
COVID-19 caused havoc for supply chains in the first few months of 2020 as traditional supply lines bent — and sometimes broke — under pandemic pressure.
And, while most logistics and supply chain services organizations have now diversified their operational structure to ensure they're not caught off-guard again, post-COVID recovery requires more than policy changes and procedural updates.
To both meet current customer demands and account for the future risk of a COVID resurgence or another pandemic, companies must deploy supply chain technology capable of bolstering critical processes without negatively impacting performance. Here's how.
As noted by Fortune, disruptions aren't uncommon in supply chains. Disruptions lasting one or two months happen every 3.7 years on average, while those lasting more than two months typically occur once every five years. COVID, however, is an outlier — the last great global pandemic was more than 100 years ago.
The problem? With digital supply chain efficacy increasing year-over-year, many supply and logistics companies have prioritized lean operations above building in supply chain buffers. It makes sense; the advent of real-time reporting and agile decision-making has made just-in-time supply and just-enough inventory objectives not only possible but profitable.
As the Fortune article points out, however, companies could spend up to 45% of one year's profits on boosting supply chain resilience and still come out ahead over a decade, so what's the disconnect?
Put simply: Performance. Implementing new warehouse processes and procedures or redesigning current planning and transportation frameworks often comes with the risk of negatively impacting performance. As a result, many companies adopted a "wait and see" approach to disruption. But, by the time COVID issues became critical, any changes were too little, too late.
This is the COVID conundrum: Supply chain spending offers significant benefits to both resilience and revenue over time but is often difficult to justify when no disruption exists. The right supply chain solutions can help bridge the gap.
So how do companies account for potential supply chain outliers without breaking the bank? Possible strategies include:
According to the Harvard Business Review (HBR), supply chain mapping plays a critical role in building resilience. By creating a map of suppliers based on their potential risk — low, medium, or high — companies can design supply chains that are naturally more resistant to concerns such as COVID.
While just-in-time inventory makes it possible for companies to reduce total costs up-front, what happens if supply suddenly isn't available as demand jumps? This was the reality of the first few months of COVID: consumers suddenly pivoting to online ordering even as enterprises faced significant supply chain challenges. By building in some buffer space with just-in-case inventory for high-demand items, meanwhile, companies can bolster inventory operations without significantly impacting total revenue.
Digital technologies such as cloud-enabled platforms and handheld mobile devices make it possible for companies to streamline in-house processes and reduce the risk of disruption driven by a lack of available information.
The right supply chain automation solution can help companies focus their energy on what matters — equipping staff with the right tools for the job and ensuring supply chains are diversified and resilient — rather than wasting valuable time with manual processes.
While some combination of the above strategies will offer the best overall resilience for companies in a post-COVID world, the efforts would be completely unsustainable without a solid technology foundation based on modern supply chain software. It makes sense — as agile, cloud-based solutions become more common as market forces shift, enterprises enjoy increasing solution depth and breadth.
The challenge? Differentiating between merely "good" software and truly great solutions. Here, organizations should consider five key factors:
Supply chain management software (SCM software) must provide visibility into key processes combined with control over these processes anytime, anywhere, in turn enabling companies to proactively respond as supply chain environments evolve.
Spend, cost, and revenue each play a critical role in profit margin predictability. The right supply chain software tools include built-in analytics and alert tools that help companies address potential profit problems ASAP, or even prevent them before they arise. Spotlighting areas where efficiency could be improved can lead to big savings over time.
Improved customer service and satisfaction
If customers aren't happy, suppliers and logistics firms can't succeed. Real-time data views and the elimination of manual processes provide more time for staff to create and deliver value-added services and solutions to increase overall customer satisfaction. From the supplier to the warehouse to the customer's doorstep, there are many opportunities to boost visibility, speed up processes, and improve customer service.
In an increasingly competitive logistics provider marketplace, differentiation is key. Equipped with agile supply chain software, freight forwarders, 3PLs, and other logistics companies can find new ways to gain a competitive advantage — such as faster shipping, lower prices, or complete product traceability — that drive increased consumer loyalty.
Software solutions that are cumbersome to deploy or don't work well with existing tools can negatively impact operational performance. Here, supply chain and logistics companies are best-served by end-to-end SCM solutions that are cloud-based and API-driven to enhance both integration and ease-of-use.
In a post-COVID world, companies cannot ignore the volatility and variability of global supply chains. And while this once-in-a-century event came with hard lessons that temporarily limited supply chain efficacy, it also helped shift corporate mindsets and drive a new approach to fulfillment and supply chain management as a whole.
And while there's no one-size-fits-all solution here — no single solution or strategy will completely insulate companies from the potential damage of a pandemic — the adoption of agile, cloud-based supply chain management software can help increase supply chain resilience to unexpected shocks.
Request a demo to learn how Magaya supply chain software equips you for the road ahead.