According to a recent study by global consulting firm Infosys Consulting, virtually all supply chains have been impacted to some degree, and the majority of supply chains have faced a 25% or greater reduction in operations.
This unprecedented global pandemic has shaken up entire industries and put the spotlight on supply chains worldwide. Survey results indicate that supply chain organizations may have been overconfident in their preparedness for a major disruption. More than three-fourths (77%) of respondents believed that their supply chains were at least somewhat prepared for a major disruption before Covid-19, while only 39% believed that their supply chains were at least somewhat prepared for a major disruption during Covid-19.
The top two areas that survey takers selected as being impacted were Sourcing & Procurement and Warehouse & Distribution with 65% and 48% of survey takers selecting them, respectively, as being impacted by the disruption.
Survey findings also show a number of other risk areas within the supply chain that need significant strengthening to mitigate future disruptions, along with insights into how supply chain leaders are now thinking about readiness, preparedness and recovery.
Respondents were asked how they would have rated their organizations’ readiness to face a major supply chain disruption prior to Covid-19, and how they would rate their preparedness now based on their organizations’ performance during the pandemic. Thirty percent of respondents fell on either end of the spectrum in their pre-pandemic assessments: 19% claimed that their organizations have no readiness plan in place, while only 11% claimed that they had readiness plans in place and were prepared to face any disruptions.
Traditional preparedness focused on single events – a hurricane or other natural disaster, a port closure, a facility shutdown – and created plans to divert to alternative locations for short durations. The scenario we found ourselves in with the COVID-19 pandemic was a multi-facility, multi-country shut down – a scenario none could have truly prepared for without advanced simulation software. Advanced planning tools can help supply chain executives create comprehensive readiness plans that prepare companies for major supply chain disruption like the one faced during this pandemic.
It is also important for organizations to assess the readiness plans of supply chain partners. One respondent indicated that, although his or her own organization had readiness plans in place, the organization still felt a significant impact due to unpreparedness on the part of their supply chain partners. This highlights the importance of actively managing supplier risk: evaluating supplier performance, working with them to achieve mutually beneficial improvements, and creating contingency plans in case for supplier shutdowns.
While it is clear that Covid-19 has had an impact on supply chains worldwide, what is not clear is how long it will take for supply chain organizations to recover from this pandemic. Survey respondents had varied opinions on this topic, with roughly 60% believing that recovery will take less than six months and surprisingly only 10% believing it will take greater than 12 months, almost the same number as those who believe their supply chains may never recover to pre-COVID levels at 8%.
Recovery will undoubtedly include a look into capabilities that need reinforcing in the near future. Survey takers were asked to rank the top three areas that need changing to strengthen their supply chains against future disruptors. The most selected capabilities were: Demand Forecasting, Readiness & Continuity Planning, and Inventory Management with 43%, 39%, & 39% respectively.
The road to recovery presents many challenges, but, ultimately, we have the opportunity to be better and stronger than before. The good news is that supply chain leaders now know well where they need to focus their efforts.