Need of a resilient supply chain in the post-COVID world

The pandemic has forced companies to revisit their risk mitigation strategy.

Dec 11, 2020 02:12 IST India Infoline News Service

The global pandemic has impacted every aspect of the supply chain across the world. This is certainly a giant disruption, exposing the conventional fragility of supply chains. There have been uncertainties in prices, cash flow crunches, and manufacturing abilities. The COVID-19 crisis has revealed the global supply chain vulnerabilities, which once again put the decades-long focus on SCM optimization to minimize costs, reduction in inventories, and drive up asset utilization to absorb delays and disruptions. Even though today’s supply chains being are highly sophisticated and critical to the competitiveness of many companies, yet due to global linkages make them increasingly vulnerable to a range of risks, with more potential points of failure and less margin of error for absorbing delays and disruptions. 

With EPC companies, the challenges are more complex and deeper. There is a huge dependence on multiple vendors - some of them are sole suppliers of specialized equipment and tools. Deliveries have disrupted from these suppliers, triggering a cascading effect on ongoing and planned EPC projects around the world. The ECP business has been hit hard due to the pandemic-induced adverse impact on the manufacturing sector. Post-lockdown, there still are several issues faced by the sector, including the shortage of skilled labour and the need for workplace safety, which impacts the production efficacies. 

The pandemic has forced companies to revisit their risk mitigation strategy.  One key aspect is about a decision on single or multiple vendors, and the scope of conflict areas among other supply chain risks.  It is becoming clearer by the day that dependence on suppliers and vendors with single-location manufacturing is not a good strategy.

To minimize the impact of supply chain disruption, companies can explore sourcing capital goods from large suppliers with globally distributed manufacturing operations. Thus, when the need arises, shipments can be arranged from the most appropriate locations. Same holds for a single vendor or sub-vendor contract. This approach helps in achieving better pricing, lower administrative costs, and smoother integration with the supply chain of the company. 

Companies must innovate approaches to re-assess customer demand, improve forecasts, and align operations. A well-thought strategy is giving birth to a new breed of supply chains in a new digitally connected world. Linear supply chains are giving way to digital supply networks (DSNs) where functional silos within organisations are being broken down to bring in better connectivity and transparency.  These networks are helping shape the new-age business ecosystem by enabling end-to-end visibility across the value chain and allowing deeper levels of collaboration between stakeholders. Artificial Intelligence (AI) and machine learning capabilities to anticipate disruptions and respond accordingly in real-time is being incorporated. New digital tools such as the Internet of Things (IoT) are bringing in greater agility, transparency, responsiveness, consistency, speed, and efficiency into legacy supply chains.

The post-COVID world demands a more buoyant supply chain strategy. It should encompass upgraded existing inventory policies, planning parameters, and building digital supply networks instead of the traditional linear models. As the business environment evolves and adapts to the new realities of the pandemic, risk analysis and business continuity plans will emerge as key elements in the finalisation of supply chain contracts. The need of the hour is to enhance efficiency, streamline operations and build resilience in the supply chain.

Authored by Mr. Rajendra Khandalkar, Group SCM Head, Sterling and Wilson Pvt Ltd.

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