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With more than 80% of global organizations reporting negative supply chain impacts associated with the COVID-19 crisis—and a vast majority still struggling across all aspects of their operations—many are now setting their sights on better supply chain resilience for 2021 and beyond.
In “Fast forward: Rethinking supply chain resilience for a post-COVID-19 world,” Capgemini Research Institute says the pandemic has forced organizations to prioritize supply chain resilience, with two-thirds (66%) stating that their supply chain strategy will need to change significantly in order to adapt to the new normal.
Just 14% of organizations are expecting a return to “business as usual,” says the research firm, which is seeing a bigger interest in creating flexible, agile supply chains that can react and adapt quickly to potential disruption. It also says 68% of organizations have adapted their business models and that 62% have made post-COVID supply chain resilience a top priority.
Putting a Tough Year Behind Them
Over the past year, organizations have struggled to quickly respond to increasing disruptions and restore their operations to a steady, reliable state. Organizations surveyed across retail, consumer products, discrete manufacturing and life sciences reported multiple challenges across their supply chains, including:
- 74% have experienced shortages of critical parts/materials
- 74% have dealt with delayed shipments and longer lead times
- 69% have had difficulties in adjusting production capacity in response to fluctuating demand
- 68% have had difficulties planning amid volatile levels of customer demand
- Nearly 55% of organizations have taken between three to six months to recover from supply chain disruptions this year
- 13% expect to take 6-12 months to recover from those disruptions
“Inevitably, this means few organizations are prepared for any further potential disruption that may lie ahead,” says Capgemini, whose research also found that to effectively cope with a similar crisis in the future, businesses must focus on these seven key strategies:
- Contingency planning: anticipating crises and running simulations to improve crisis response
- Localization: prioritizing localization as well as regionalization of supplier base and manufacturing footprint
- Diversification: prioritizing diversification of supplier base, manufacturing and transportation options
- Sustainability: prioritizing sustainability across the supply chain to withstand environmental and regulatory disruptions and meet evolving customer expectations
- Agility: prioritizing flexibility in production and decision-making, and displaying agility in shifting to new business models
- End-to-end cost transparency: accounting for costs with a clear picture of risks associated with low-cost strategies
- Visibility: emphasis on data-sharing with partners and having full visibility of the supply network
Right now, Capgemini says a significant proportion of organizations are taking the necessary measures to build capabilities around the first three dimensions, with 84% citing improving crisis-preparedness as a priority post-COVID. Also, 65% of organizations are actively investing in localizing or regionalizing their supplier and manufacturing base to reduce risk and be closer to their customers.
“As many as 65% of organizations are actively investing in localizing or regionalizing their supplier and manufacturing base in order to reduce risk and to be closer to their customers,” the research firm states. “Diversifying the supply chain is also front of mind; 68% of businesses are investing in diversifying their supplier base and 62% in diversifying their manufacturing base.”
Building Strong Relationships
Disruptions like COVID-19 are not new to supply chain organizations. In the past decade, they have also witnessed the Japanese earthquake, the Ebola crisis and Hurricane Maria, among others. However, no other crisis has highlighted the underlying risks of current supply chains as COVID has.
Capgemini says strong collaborative relationships with supply chain partners can go a long way in helping organizations react rapidly to disruptions. “The new normal will demand agile responses to changes in the marketplace,” Unilever’s CSCO Marc Engels told the research firm. “The power of partnerships will be critical to unlocking agility and innovation in the end-to-end value chain. If there ever was a need to strengthen value-chain collaboration and partnerships, it is now.”
