As we enter the second half of 2021, countries around the world like the U.S., Spain, France, and Germany are beginning to see promising declines in COVID-19 infection and mortality rates. Thanks to a massive vaccination effort, more than 3.29 billion vaccines have been administered worldwide. And many are hopeful for a return to normalcy soon as increased vaccinations allow more economies to open up again.
But we know the pandemic, on a global scale, is far from over.
As the New York Times Covid World Vaccination Tracker reports, “there is already a stark gap between vaccination programs in different countries, with some yet to report a single dose.” For instance, compare the U.S., which has vaccinated 55% of the population (at least one dose) to Japan, which lags behind at just 27% of the population vaccinated.
Until vaccination rates (and access) increase equitably worldwide, we will continue to see significant impacts from the pandemic on global economies and business-especially supply chains.
The ongoing impact of COVID-19 on global supply chains
The COVID-19 pandemic has had an unprecedented impact on global supply chains. In the past, supply chain resilience efforts have focused primarily on mitigating single-point failures. For example, building contingency plans and sourcing backup suppliers.
However, the pandemic laid bare vulnerabilities companies weren’t prepared for, fracturing multiple points of the supply chain all at once, leaving suppliers, manufacturers, and vendors scrambling to patch the holes.
In fact, a staggering 75% of companies reported disruption during the pandemic leading to $4 trillion of lost revenue in 2020 and significant damage to company brands.
A new GEP-commissioned survey of U.S. and European executives revealed the far-reaching impact of the pandemic on supply chains and current and emerging threats businesses will have to address going forward:
Nearly half of businesses (45%) report that COVID-19 “significantly” disrupted their supply chain. But multinational companies also experienced disruption from cyberattacks (36%), commodity pricing fluctuations (33%), and diverging regulations (32%).
“Supply chains and procurement are a key driver of sustainable competitive advantage, but despite spending millions on ERP solutions, most global companies are ill-equipped to effectively manage complex global supply chains in face of uncertainty,” said John Piatek, GEP’s vice president, consulting, and chairman of the firm’s Thought Leadership Council.
Moving forward towards a post-pandemic world, companies will have to take a multi-pronged approach to supply chain risk management if they want to remain competitive.
Changing priorities
The pandemic revealed key vulnerabilities and blindspots in the global supply chain. This has resulted in a shift in strategic priorities as business leaders work towards stabilizing their supply chains and mitigating future risk.
Unsurprisingly, at the top of the priority list is supply chain visibility. Lack of visibility into their full supply chain landscape meant many companies were blindsided when the pandemic hit-and they aren’t interested in making that mistake again. Visibility will play a key role in the next 12-36 months in identifying risks and addressing vulnerabilities before they cause major disruption.
But visibility isn’t the only pivot we’ve seen. Other new priorities include:
Retraining and reskilling the workforce
In a late 2020 Ernst and Young survey, 61% of respondents reported that they will retrain the workforce in the next year to help workers use digital technologies, operate equipment with health and safety in mind, and adapt to changing company strategies.
Investing in AI and machine learning
The same survey also found an increased focus on investments in automation and AI and machine learning, with 37% of respondents already using these technologies and another 36% planning to adopt them soon.
Diversifying suppliers
Companies learned the hard way how risky it is to rely on a narrow group of suppliers. While linear supply chains increased efficiencies, they came at a higher risk. Now, many businesses are trading efficiency for increased resilience and stability by diversifying their supply network. This includes not only adding backup suppliers but also looking to local or regional suppliers that may be higher cost but operate in less risky markets and can deliver goods quickly.
Increasing supplier intelligence
In order to better understand their supply chain and increase end-to-end visibility, businesses need to prioritize and invest in better supplier intelligence. The right supplier intelligence solution not only delivers more validated, reliable data but also provides proactive monitoring and deeper supplier research and benchmarking to help businesses preemptively mitigate risk and disruption.
Increasing sustainability
Originally, many predicted that COVID-19 would push companies to set sustainability goals aside. Instead, COVID-19 spurred greater urgency to build sustainable supply chain practices. And today, 85% of businesses are more focused on environmental and sustainability goals (ESG) than prior to the pandemic.
Pandemic-driven digital transformation
While digitization isn’t a new focus, the pandemic has accelerated the push for digital transformation in the supply chain industry.
According to a new McKinsey Global Survey, due to COVID-19 companies have accelerated the digitization of their customer and supply-chain interactions and of their internal operations by three to four years-and the share of digital or digitally-enabled products in their portfolios has accelerated by seven years.
This renewed focus and accelerated push towards digitalization aim to:
Build transparency and resiliency
Companies’ vulnerabilities to disruption were deeply exposed due to COVID-19. New initiatives, like diversification and contingency plans, are more important than ever before. Digitalization can help businesses efficiently and effectively source new suppliers and manage their supply chain with confidence.
Create competitive advantage
In a 2017 survey, McKinsey found that cost savings were a top priority for executives’ digital strategies. While digitization can significantly boost efficiencies through automation and innovation, leaders now view digital technology’s greatest value in terms of competitive advantage.
Reinvent the way companies discover, evaluate, and monitor suppliers
Digitalization is key to expanding supply chain visibility and accurately sourcing, assessing, and monitoring suppliers.
As businesses invest in digital supply chain management solutions like Craft, they will be equipped to better understand their supplier landscape, adequately diversify their supply chain, uncover potential (and often unseen) risks, and proactively respond to threats before they become a major disruption.