Leadership outlook on Supply Chain & Logistics in COVID-19 times and beyond, Global Supply Chain magazine
The Coronavirus (COVID-19) pandemic currently sweeping the globe has triggered the worst financial meltdown since the ‘Great Depression’ of the 1930s. The ravaging pandemic is indeed taking a heavy toll with increased daily infections, deaths (and recoveries) but also a devastating effect on the economies of nations in its wake. Anecdotal evidence points to CEOs worldwide coming to terms with the reality that business will be anything but normal over the coming months. Most are bracing for a protracted, long drawn U-shaped recession seeing the virus outbreak as a growing risk and a real threat to their business survival – Editor
Brian Cartwright, Client Partner, Global Supply Chain & Logistics at Pedersen & Partners, discusses the post-COVID-19 supply chain and the future of work with a cross section of senior executives and professionals from multiple industry verticals. Here are the first-person narratives of the officials interviewed. Here’s what they had to say:
For supply chain leaders, it is more important than ever before to be flexible, willing and able to adapt to change. Adaptability, flexibility and the use of innovative technology are essential for supply chains to operate effectively in what many of us are calling the “new normal”.
I recently asked a few of my contacts in senior leadership roles if they would be willing to share their thoughts in writing about the bigger picture in terms of the impact to the supply chain.
More specifically, I asked them how they think this crisis may impact the way in which the supply chain is managed and structured in the future. I was interested to know how they believe relationships will change on a local, regional, and global level with customers, partners, and service providers, and what long-term changes they anticipate once the crisis is stabilised.
Saskia Groen-in't-Woud, Chief Executive Officer – Damco
One of the ways in which I see the supply chain changing in the future will be the dampening of the just-in-time trend. As a result, I expect to see a combination of near sourcing and diversified offshore sourcing, plus – from a finance perspective – a rethink of inventory management. I expect business resilience to become a core demonstrable quality in service provider selection processes.
My personal wish, once we are through the crisis, is for a trend towards more sustainable consumption and an e-commerce model that supports this. More pragmatically, I believe there will be a shift towards companies having a more diversified supplier strategy, as well as a shift in purchasing priorities – more health-related demand and less large capital spending.
Business relationships will change, likely with a shift towards potentially longer RFQ (Request for Quotation) periods and an emerging trend to find reliability and dependable quality through relationship-driven sourcing, deeper quality assurance management and a strong focus on business resilience.
While working remotely, we have been really well-connected, and we addressed the additional VPN (Virtual Private Network) connectivity required very early. We deployed our business resilience capability early on, and it’s been a very worthwhile investment. We have been able to keep our customers informed and our people aligned, and ensure that we keep lines of communication open regarding how best to stay close and meet their needs.
Our air charters continue to be well-coordinated and well-aligned with customer requirements.
In the long term, once the crisis is stabilised, we’re going to continue to drive our business resilience, to find the right way to balance working from home and on-site, to develop our people’s skills and to take the capabilities of our cloud-based backbone to the next level.
Djamel Rezzig, Group Head of Last Mile – Chalhoub Group
The retail industry is facing a major challenge, with stores being closed and employees asked to stay home. The supply chain was disrupted as the main source of supplies was cut. Restrictions were imposed on fulfilment centres and last mile delivery teams, together with a stack of constantly changing regulations, curfews, and permits.
For most supply chain leaders the solution has been to create a contingency plan and reassess the situation daily. While import activities for organisations were reduced, the e-commerce business has boomed.
In the future, I believe that the impact of the pandemic on the supply chain will change the way that companies look at our activities. Our role has suddenly become “essential” within the retail industry, and I am confident that the level of attention has changed.
Supply chain, logistics, e-commerce fulfilment and last mile systems will be focused to delight our customers. I predict that post-COVID-19, companies will invest more in logistics, technologies, robotics, and automation to avoid business continuity disruptions in the future.
Miguel Ibarbia, Supply Chain Manager Middle East and Africa – BIC
It is evident at this stage that the COVID-19 situation will impact supply chain management moving forward. Managers will need to focus on building much more agile and resilient supply chains, as great swings in supply, demand, and costs become the new normal.
In terms of demand, we will need to get used to working with several different scenarios at the same time – high, low, optimistic, pessimistic – and plan accordingly. Demand shaping will become increasingly important as supply constraints and product shortages start becoming apparent. In terms of supply, practicing social distance at manufacturing sites, or even warehouses, will have an impact on overall capacity, and suppliers might struggle to deliver original output levels.
This will probably increase product costs as well. Product allocation will become normal, and considerable range rationalisation will be needed to free up capacity for the most important product families (which might come as an opportunity to finally get rid of all those non-performing products).
Balancing demand and supply in this context will probably require the S&OP (Sales & Operations Plannig) to become a more frequent exercise than today, in order to support supply chain agility. It will also be necessary to develop supply chain resilience by continuously monitoring supplies and suppliers, while building alternative plans.
Nevertheless, I believe it is important to acknowledge the great level of agility and resilience that supply chains around the world are already displaying, even as we consider how much more we will need moving forward. In the middle of this considerable disruption, most supply chains are successfully fulfilling market needs, albeit through alternative means or alternative offerings.
André N. Verdier, Managing Director, Middle East – Blue Yonder (previously known as JDA)
In terms of the big picture, the COVID-19 crisis has brought one major development for supply chain professionals. It is now true that the majority of people outside the field, from individual consumers to global CEOs, have gained unprecedented knowledge and focus on supply chain as an activity.
Consumers who were previously unconcerned with issues such as the source of goods, shipping routes, and transportation networks are looking at not only the origin of the contents of their shopping baskets, but the end-to-end process that put those contents there.
The heightened awareness that the supply chain exists to fill those baskets increases the pressure on professionals in this field. Large corporations and SMEs alike are realising the importance of their own supply chains, and the agility and robustness of their operations are now at the forefront.
Agile supply chains
Most companies are realising that their supply chain operations are not as agile and resilient as they had anticipated and hoped, although some are doing well, mainly because of their prescient adoption of technologies and systems.
In retail environments, traditional sale and distribution methods will continue to shift from in-store to home-based, and e-commerce will be the order of the day. Advance visibility for supply, production, inventory and distribution will be a standard requirement, irrespective of the industry.
There will be changes in the way we manage supply chain in the future due to the COVID-19 situation, and these will be mainly to do with planning, visibility, automation, AI and machine learning. These will have to be part of any future supply chain management strategy and operation. Without an integrated supply chain platform which includes these components, business operations cannot be sustained.
This new reality of our current method of interaction will continue going forward. Remote working and electronic/video communication will become increasingly more acceptable as the norm. However, there will be some return to the previous ways of working; a personal face-to-face meeting still has a distinctive value, even if such meetings happen less frequently in the future.
On an operational level, teams, departments, customers and suppliers within the supply chain will interact in situation rooms that are created to deal with exception management cases, while the day-to-day routine will be automated, powered by AI and machine learning.
My advice to people in the supply chain domain is to review your solutions strategy, and ensure that you have an integrated supply chain management platform which links all aspects and allows for full visibility of your supply chain. Take advantage of any bandwidth you have now to ensure that your operations and your supply chain is agile, efficient and robust. Remember that the new normal will soon just be normal, and that change is an inevitable part of growth and evolution.
Walid Khoury, Managing Partner – ALS Logistics Solutions
COVID-19 is spreading globally faster than ever predicted, which means increased supply chain disruption and significant change in people’s daily habits and behaviour towards one another. The supply chain is impacted by very limited access to manpower due to quarantine, factory shutdown and limited or insufficient access to logistics providers for the movement of goods.
The entire supply chain is in crisis management mode, with work being assessed on a daily basis. In the meantime, customers are impacted with increased costs of shipping and companies increased costs.
In my opinion, this crisis will lead most organisations to realise that their current technologies are no longer competitive, and that they must move towards automation and the need to implement technologies that support business continuity. The cheap manpower handling version will no longer be a good strategy if they wish to remain afloat.
Supply chain providers must put innovation and futureproof process handling at the centre of their planning. They must anticipate customer needs, manage solutions and prepare for critical demands, consumer demands and instability, and similar challenging conditions.
Planning and managing
Additionally, supply chain leaders must start planning and managing their processes beyond the current market platform, and create robust models and tools that will cater for future challenges.
I would remind my friends and colleagues not to lose their heads in the current situation, and instead start preparing for the coming return to normalcy, and the challenges that await us all after the lockdowns are lifted and people are allowed to move freely.
No one can predict the behaviour of the markets after this crisis; if management can keep their staff on the payroll and not sacrifice them to maintain their former profit margins, this will pay off in the future. This crisis is not the end of the world, so please do not make it so for the people around you.
Gaurav Biswas, CEO – TruKKer
The COVID-19 spread has caused unprecedented levels of disruption across multiple industries and geographies. Everything that is transported by air, sea and land has been affected. The first impact was on exports from China, where importers faced disruption of the supply of raw materials.
However, over the last few weeks, the impact has been on entire supply chains, from the supply of raw materials to the demand for finished products. The lockdowns have impacted the demand for all discretionary consumption.
However, supply chain management will go through multiple positive changes as a result of COVID-19. While there are current challenges, the crisis will accelerate the adoption of technology at all levels, including the digitisation of cumbersome paperwork and the automation of processes with the use of predictive algorithms. Supply chain management will thrive with multiple technology innovations that facilitate shared economy principles for otherwise asset-heavy businesses.
Upswing in remote working
We are already seeing the increased use of remote working, video conferences and virtual networking, and this trend will remain. However, humans are social animals, and virtual networking will not replace the need for a handshake and hug.
These are unprecedented times, and no one really has the past experience to know how exactly how to deal with it. The best way to handle such a crisis is to remain positive, remain informed and spread positivity. Innovation-driven companies should focus on building solutions that allow supply chains to keep moving in a safe environment, prioritising the safety of the thousands of workers who are contributing towards moving cargo across the world.
Roger Philips, General Manager – Tranzone Logistics
Tranzone has seen an impact on supply chain and trade routes globally. Our inbound shipments by both sea and air freight have been affected. For sea freight, we are seeing delayed containers en route, increased customs clearance times due to a skeleton staff working at customs, and reduced driver availability to bring the container to the warehouse due to screening.
Globally, the main impact on air freight has been cargo availability, while airlines cope with the change of environmental conditions due to COVID-19. International cargo flights are changed at the last minute to maximise flight capacity, the type of aircraft used is changed, ground handling is being done by skeleton crews, and office staff are working restricted hours.
Moreover, we have seen road freight exports from Dubai delayed at the border by up to 10 days due to additional customs clearance checks, and the sheer volume of trucks in a single location. We expect this to continue for the coming months while the containment of COVID-19 continues.
We will see companies learn from this, asking themselves: Do we have the right business continuity plans in place? Do we have manufacturing sites in the right locations? Do we have enough safety equipment stocked in the right locations? Can we increase manufacturing to meet the high demand? These questions and many more will be considered in the future when we restructure and redesign our supply chain models.
We have seen this crisis as a global stress test of working from home. We can use it as an opportunity to see which areas of a company can work smarter and more effectively, considering that staff are in different locations. People’s behaviour will change, and so will relationship management, as a formerly face-to-face meeting might now be conducted by phone or videoconference.
These are lessons that we can incorporate into the business world, as IT providers continue to develop tools that we can grasp and use to do business in a smarter way, thus enhancing shareholder value and operational efficiency.
Brian Cartwright, Client Partner, Supply Chain & Logistics – Pedersen & Partners
In summary, we can probably agree the world is going to be very different once we come out of this pandemic. Above all taking appropriate measures to ensure the safety and welfare of people is paramount.
Global supply chains will be adapted to become more robust and resilient. It is likely companies will gravitate towards local or regional sourcing models, with a diverse supplier base being selected and managed as partnerships, with a quality-focused approach taking priority over cost.
Planning and forecasting exercises will have to be completed more frequently. Companies will change their stance on inventory management. They may end up holding more inventory than they did before the crisis to ensure they have backup stock in local or regional hubs to ensure business continuity in the event of future disruptions.
All these changes will have a major impact on the way global logistics networks are structured and operated.
There will be an increase in the use of technology, systems and automation in manufacturing, retail, warehousing, and materials handling, and in the use of robotic process automation and machine learning for repetitive or administrative tasks.
The crisis has also served to accelerate digital transformation, which is a positive development for people and organisations alike, although some organisations have a lot of catching up to do.
The last mile delivery space is currently one of the hottest opportunities for logistics companies to capitalise on. In doing so it is vital to have a clear and innovative strategy, a suitable technology platform, and the right people in place, but the customer experience is fundamental to success.
For retailers and bespoke kitchens or restaurants, it is imperative to have the right delivery partner. The delivery partner is the only point of physical contact for customers when they receive their order, and the experience – whether positive or negative – will speak volumes about the seller.
Last mile delivery
The cheapest last mile delivery option will quickly turn out to be the most expensive in the long run, as customers are lost due to poor delivery experiences.
Working from home has become the normal practice for many people. Some companies already had the processes, infrastructure, and technology in place for a quick shift to remote working, but others have had to rapidly adapt to this.
It has been necessary to quickly get up to speed with current technology, and to make use of cloud services and video calls to ensure that real time collaboration and contact with co-workers and regular contact with clients and suppliers remains possible.
Taking the above into account, I would suggest that as paradigms shift, employers may want to consider reassessing the expertise and functions required within their future supply chains.
Businesses that have already started to review their organisational structure and make these assessments will have a significant strategic advantage over their competitors. It will be particularly advantageous for businesses to make concerted efforts to identify people with the required skills now, (in terms of required expertise, functional areas and geography) with an eye to potentially making external hires when restructuring.
As each country begins to come out of the crisis, having the first-mover advantage of knowing who to approach and where to hire them from will be a critical factor in gaining market share from the competition.
In conclusion, COVID-19 has already had an immense impact on the area of supply chain and logistics but is simultaneously bringing great opportunities for innovation. It is imperative that we stay positive in this situation and remain agile.