Supply Chains of the Future
Supply chains are a linchpin of business, but the disruptions businesses underwent because of the Covid-19 pandemic have changed them forever. Businesses, however, still have to focus on supply chain management.
According to McKinsey, the challenge of planning for the future was going to be difficult in any event. Even before the pandemic, they predicted that businesses were going to experience one- or two-month disruptions to their supply chains every three-and-a-half to four years. The reasons for this range from natural disasters to cyberattacks to trade tensions to climate change and complex supply chains. Those factors and those predictions have not disappeared; they have just been out of the headlines as companies struggle to continue their operations in the midst of a major upheaval.
Going forward, the pre-Covid focus on cost and efficiency needs to shift and expand. Companies have to dig deeper to find where their supply chain is vulnerable to disruption. Is the physical location of the supplier problematic? Does the supplier have contracts with many companies? Are the supplier’s suppliers vulnerable?
Identify Weak Links
Identifying the weak links in a company’s supply chain is important because it allows the company to preemptively source new suppliers. This is critical if McKinsey’s prediction is correct — and companies can expect to be disrupted approximately twice every 10 years.
Companies can do a wide range of things to protect their supply chains, including the following:
- Sourcing suppliers closer to home. Among other things, weighing the viability of this as a solution involves considering paying more for the goods to alleviate the possibility of the supply chain shutting down.
- Corporate social responsibility. For a number of years, consumers have been interested in whether a company’s suppliers use child labor or abuse the environment when producing their goods. This can be an important issue when new suppliers are sourced.
- Redundancy. Having more than one supplier for critical goods and having a backup marketing plan are two examples of redundancy. Being prepared to pivot and take advantage of what is available is at the core of resiliency.
- Innovation. As companies reevaluate their supply chains, they should consider a hidden benefit: the opportunity to innovate. Using different materials or doing things a new way can have a positive effect.
The Covid-19 pandemic remains with us even as businesses plan for the future. The challenge is that no one really knows what “normal” will look like when the pandemic ends. What we are calling the “new normal” may be only an interim step toward whatever is next. Companies, however, cannot simply throw up their hands. They need to proactively figure out how they can make their supply chains as impervious to future disruptions as possible.
Call us today to learn how.