What COVID-19 has taught us about Supply Chain Excellence

The COVID-19 pandemic has reminded business leaders everywhere of  the interconnectedness of our world, particularly in the context of supply chain management. As borders closed and shelter-in-place restrictions slowed industrial production, the world quickly saw just how much we all rely on the exchange of vast amounts of components to make the final goods. For example, bestselling author A.J. Jacobs revealed that no fewer than 1,000 people around the globe are involved in producing his morning cup of coffee in his book Thanks a Thousand.

The coronavirus has exposed what happens when this intricate supply chain breaks down, which is why leaders must reevaluate their existing processes to uncover vulnerabilities, fortify fragile networks and mitigate risk moving forward.

Luckily, now is the perfect time to hit the “reset” button. This pause from economic normalcy presents a unique opportunity for businesses to restructure supply chains to be more efficient and resilient – not just during the outbreak, but during any unpredictable disruption that lies ahead. In 2019, $150 billion in global losses were attributed to natural disasters (McKinsey, 2020).

To prepare for a post-pandemic world, leaders must implement short term operational tactics and devise long term strategies that involve diverse, flexible networks. Although thinking about rebuilding our global economy and supply chains is daunting, there are many different roads leaders can take to improve the situation and minimize vulnerabilities now and in the future.

Multi-Company Sourcing

The virus quickly exposed the supply chains that were too reliant upon single-source trade partners. These networks are the ones that likely broke down first and remained incapacitated with no obvious alternative supplier. Leaders must use operational insights from the past few months to identify the most vulnerable areas and reconfigure the related supply chain and management structure to fill in the gaps and resume production. Primary supplier relations must be supported by secondary and tertiary options. Technology like AI, 5G and block chain can also help identify weaknesses in real-time.

Replace Hardware by Software Where Possible

Throughout the rapid development and evolution of connected devices, we’ve become well aware of the value of over-the-air firmware updates to enhance security and software and hardware compatibility in the aftermarket. In the pre-market, firmware proves to be a powerful design tool, to permit a modular approach to drive continued enhancements to performance and reliability, but also allows for plugging holes in the supply chain with components that may not be identical. Further, the flexibility provided by a software-centric approach is advantageous; for example a number of country-specific variants for a product can be “produced” through software flashes, versus recalibrating hardware design.

Geographic Diversity

Balances in geographic dependence are critical to insult the impacts of the unknown, whether that be natural disaster, tariffs or a health crisis. Any one of these events and more can shut down operations or trade of a component from a specific region in an instant. Furthermore, it’s important to evaluate goods from finished product back to the raw material inputs. Geography will be an important element to consider in evaluating multi-company plans as well as design flexibility plans. For example, if a material only comes from a single region, you would be wise to consider today how you can design around any potential interruptions tomorrow.

I always advise colleagues to have a contingency plan in place so that when disaster strikes they’re equipped to think on their feet and adapt quickly. There is a huge opportunity to use this moment in time to rebuild a resilient global supply chain so that we don’t make the same mistakes twice. After all, COVID-19 is a black swan event, but it isn’t an isolated incident. The time for change is now, and if we join forces and learn from past mistakes, we will emerge from the pandemic stronger and more knowledgeable than ever.