Supply chain disruption

Repurposed supply chains of the future must have resilience and responsibility at their heart

State of supply chains

In the eye of the storm

COVID-19 has disrupted supply chains around the world. But they’ve also been a vital lifeline to support the response, keeping essential medical supplies, food and other key necessities flowing where they’re needed most. There’s no doubt that the pandemic has tested the ingenuity, resilience and flexibility of supply chain leaders globally, as they have sought to maintain essential operations.

The pandemic has also proved to be a real test of corporate values and purpose. Consumers, investors, governments and communities may ultimately judge companies on how they respond to this period of disruption.

Impact on supply chains

With the virus still a live threat and a number of regions and economies in lockdown, while others emerge into a very different world, the disruption to supply chains continues to be severe. As economies restart, the supply chain will be critical to supplying goods and services quickly, safely and securely.

Business leaders must make rapid decisions, and take immediate actions to sustain business operations to serve their customers, clients and communities, as well as protect and support their workers.

The repurposed and reshaped supply chains of the future will need to be characterized by both resilience and responsibility. These will help communities manage the short-term crisis and enable businesses to build around their customers and help economies rebound.

94%

of Fortune 1000 companies are seeing supply chain disruptions from COVID-19.

75%

of companies have had negative or strongly negative impacts on their businesses.

55%

of companies plan to downgrade their growth outlooks (or have already done so).

Risks and challenges

Supply chain risks

With the COVID-19 crisis, fundamental changes in consumer behavior, supply chains, and routes to market are knocking companies off balance. Responding to the pandemic has underscored the need for leaders to accelerate the adoption of agile ways of working and value chain transformation to help outmaneuver uncertainty.

COVID-19 is not a typical risk event. The scale of its impact eclipses anything most supply chain leaders will have seen before. The speed of the escalation requires continuous end-to-end assessment, optimization and monitoring. Companies need to respond rapidly and confidently to shape and execute a short-term tactical plan that will mitigate the risks to human health and protect the functioning of global supply chains. In doing so, strong data and analytics capabilities are crucial in understanding complexity, anticipating potential disruption, and quickly developing a response.

Supply chain challenges

Supply chains lack global resilience and are breaking down in the face of multi-country disruptions.

Supply chain and operations are becoming more costly (eg less global and ecommerce fulfillment costs) – and can often represent a company’s highest costs.

The significant impacts that supply chains and operations have on the planet and society are not meeting stakeholders’ expectations for sustainability.

Talent gaps across the supply chain and operations continue to create high dependency on the human workforce.

A lack of flexibility inhibits the ability to address customer demands for personalization and customization.

IT systems continue to be expensive to run, inflexible and often over-reliant on legacy technologies.

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How to respond to disruption

Businesses must navigate the financial and operational challenges of coronavirus while rapidly addressing the needs of their people, customers and suppliers. By taking the right actions, supply chain leaders can turn massive complexity and supply chain disruption into meaningful change.

As they respond to both the immediate impacts of the pandemic and prepare for what comes next, a continuous cycle of risk mobilizing, sensing, analysis, configuration, and operation will help to optimize results and mitigate risks:

The COVID-19 pandemic is not just a short-term crisis. It has long-lasting implications for how people work and how supply chains function. There is a pressing need for businesses to build long-term resilience in their value chains for managing future challenges.

This requires holistic approaches to manage the supply chain. Companies must build in sufficient flexibility to protect against future disruptions. They should also consider developing a robust framework that includes a responsive and resilient risk management operations capability.

That capability should be technology-led, leveraging platforms that support applied analytics, artificial intelligence and machine learning. It should also ensure end-to-end transparency across the supply chain. In the long-term, risk response will need to become an integral part of business-as-usual protocols.





Supply chain planning

The unprecedented supply chain disruption caused by COVID-19 has had severe operational and financial consequences, with planners having to address issues including:

  • demand drops and surges by segment
  • supply shortages
  • inventory placement challenges and
  • reduced productivity.

To further complicate the challenge, planners during the pandemic have been unable to rely on the steady-state models at the heart of most existing planning systems. Instead, they’ve played a vital role by making decisions based on real-time information, acting as the “nerve center” for the flow of supply chain data.

What’s now? Five supply chain priorities for immediate action

  1. Put people first: Keep the planning workforce healthy and productive by supporting new ways of working.
  2. Leverage data to improve visibility: maximize visibility into demand, inventory, capacity, supply and finances across the ecosystem.
  3. Define segmentation to prioritize demand: carefully analyze demand and define priority micro-segments.
  4. Build a sales and ops SWAT team: mobilize dedicated planning and execution teams that are able to undertake multiple interventions and orchestrate responses effectively.
  5. Evaluate supply chain scenarios: run simulations to predict when and where excesses and shortages are likely to occur as well as running end-to-end scenarios to get actionable insights that will optimize operational metrics.

What’s next? Three key actions for supply chain planning from now on

Companies have an opportunity to use this challenging period to discover where investments are needed, evolve the supply chain planning function, and reposition the organization for growth once economies rebound. There are three key focus areas:

  1. Evolve digital to unlock data
  2. Rethink the operating model
  3. Build an asset-light network.




Supply chain logistics

COVID-19 is disrupting distribution on a global scale. Increased border controls and customs regulations result in longer wait times, and lack of capacity for long-haul and last-mile fulfillment create extreme challenges.

As a result, organizations are accelerating their digital transformations with logistics businesses starting to introduce capabilities like real-time order monitoring, end-to-end inventory visibility, and super-reverse logistics experiences.

But businesses can also use this opportunity to reset their operations with digital capabilities and renew logistics operating models to increase operational efficiency and effectiveness. Doing so will enable them to emerge stronger and with supply chains that are more resilient to future disruptions.

Five key actions to address COVID-19’s impact on logistics

  1. Improve visibility - use an integrated logistics control tower to get real-time visibility into operations.
  2. Increase flexibility - repurpose assets, inventory and capabilities to balance supply and demand.
  3. Communicate effectively - ensure proactive communication with onsite and remote workers, suppliers, carriers and customers
  4. Support the workforce - address the physical health and mental well-being of the core workforce as well as the extended logistics workforce.
  5. Be a responsible steward of supply chains - think creatively and with purpose about how to support customers, suppliers and logistics networks affected by COVID-19.


Supply chain procurement

COVID-19 has severely disrupted supply chains globally. Procurement leaders need to maintain business operations, fulfill urgent demands, and mitigate supplier challenges against a backdrop of significant disruption to their teams, people and local communities.

Initial efforts have focused on managing upstream supply disruptions from tier 1 and tier 2 suppliers, while rebalancing short-term sourcing decisions in the light of supply network constraints. Now they need to turn their attention to the medium-term security of the supply base, unlocking funds intelligently and building future-proof resilience.

This approach will not only help manage the immediate COVID-19 emergency, but also build stronger and more resilient businesses ready to thrive as economies return to growth.

Five areas for immediate attention

  1. Put people first - develop a refreshed digitally-driven procurement operating model and new ways of working with internal customers, the supplier ecosystem, and external partners.
  2. Secure the supply base - manage and mitigate supply uncertainty with suppliers of all sizes – small, medium and large.
  3. Unlock funds intelligently - double-down on responsible interventions to minimize unnecessary spending and preserve cash for future growth initiatives.
  4. Build resilience for the future - update risk management strategies to ensure resilient, purpose-led procurement decisions.
  5. Innovate with purpose - take a purpose-led approach to build greater trust, transparency, customer centricity, and innovation as economies rebound.


Procurement for the post-COVID world

COVID-19 has stretched even the best procurement leaders. They’re playing a leading role in safeguarding their company’s financial viability and protecting a severely disrupted supply base, while switching to a different way of working. As they look to prepare for the post-pandemic future, they should keep three things in mind:

Stay the course - plan for a downturn lasting several months, or longer, as well as for the risk that infection might return globally, regionally or locally.

Learn and evolve - use applied intelligence to uncover and understand weaknesses that were previously hidden, and adopt a mindset of continuous innovation.

Be a force for good - reshape the organization to combine greater resilience and responsibility and help both the business and society come through stronger.

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Manufacturing

During the COVID-19 pandemic, manufacturing leaders have focused on the immediate challenges of keeping their businesses stable.

They’ve formed rapid response teams (Accenture’s supply chain resilience recommendations) to gain a better understanding of their production demand changes, labor support challenges and supply chain ecosystem constraints.

They also need to focus on building a business that is as future-proof as possible, using new technology to increase resilience, protect operations, and support workers through the crisis. As well as being essential now, these future-proofing actions will also help sustain competitive advantage to accelerate business growth once economies rebound.

Five actions to build agility now and in the future

  1. Understand the impact of demand disruptions - rapidly identify the products that are most critical for stabilization and growth, shore up associated supply chains, and reconcile critical skills to meet near term and future demand.
  2. Manage workforce safety and flexibility - keep the trust of workforces by addressing not only their physical safety, but also their mental well-being and need to stay connected with coworkers.
  3. Ensure manufacturing ecosystem viability - understand the implications of COVID-19 and contract provisions for each critical ecosystem player, including material suppliers, contractor companies, co-manufacturers and logistics providers.
  4. Rebalance physical production network assets - make fast and accurate decisions on the capital investment and effort required to redeploy underutilized assets or build greater flexibility in current assets in the short term, ensuring those decisions do not inhibit future growth.
  5. Leverage digital capabilities - manufacturers with digital platforms, accessible data and advanced analytical capabilities will be able to respond more quickly, accurately and successfully to COVID-19 disruptions.

Looking to the future

Manufacturers must take a hard look at existing operating models – where and how work gets done (and for what reason), challenging legacy ways of working, and building in more transparency and intelligence across core workforce dimensions (ecosystem partners and the physical production network).
These are essential steps for manufacturers to reshape themselves into digitally-enabled, resilient, and agile organizations.

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