One way or another, the industry has managed to successfully surf the uncharted waters of Covid-19. Nick Bradley asks what we have learned to be in a better position for the next big disruption
Over the course of the past 18 months, the global supply chain has been tested from one extreme to the other – from almost total shutdown at the start of the pandemic to an over-indexed response now. Factor in Brexit, evolved regulations, staff shortages, politicking, the Suez Canal blockage, protests and whipped-up media demand, it’s little surprise that we’re in the situation that we are currently in.
“But these are major macroeconomic incidents that the world has eyes on,” says Kit Kyte, CEO of Checkit (pictured below). “In reality, the workings of the supply chain – the grease that keeps goods moving in the system – are all the elements we don’t see. More pertinent, he adds, are the “everyday issues” that businesses do “not possess the capacity to examine, understand and act upon”.
Dark operations
The challenge, Kyte goes on to explain, is that leaders are managing a vast ecosystem of people and processes, spread across multiple locations and time zones. In many cases, reporting methods are outdated, creating knowledge gaps that leave organisations vulnerable to risk and unable to see opportunities for innovation – something known as ‘dark operations’.
“This is what is causing the problems and the biggest learning from the pandemic is that businesses need greater visibility of their day-to-day dark operations,” continues Kyte. “Outdated practices that stand in the way of information sharing at the necessary scale and pace of today’s operations will need to be replaced with a new mindset that focuses on continuous improvement. Resilience and agility are two qualities that will characterise successful supply chains in the future.”
To achieve that, Kyte says leaders need the capability to identify and address areas of weakness. They need closer engagement with the ‘deskless’ workers who are so crucial to effective operations. They need to co-ordinate resources efficiently by liberating people from administrative tasks that don’t add value. They also need accurate data to prove standards and SLAs are being met consistently to strengthen the confidence
of customers, regulators and employees.
Sudden impact
The Covid-19 pandemic triggered the advent of ‘spontaneous supply chains’. “These are built almost impulsively because the situation suddenly demands it, or an opportunity arises,” says Dr Fahian Huq, Senior Lecturer in Supply Chains at Alliance Manchester Business School. “It could be prompted by a natural disaster or a rapid spike in demand as we saw recently with the dearth of semiconductors.
“Where supply chains are typically planned, spontaneous supply chains are natural and unconstrained,” Huq adds. “The pandemic provided the perfect storm for different types of spontaneous supply chain strategies to develop, which under normal circumstances would not have been possible.”
The pandemic showed how much our economy and way of life depends on supply chains. “Many industries are starting to see an explosion in raw material shortages, with supply chains becoming increasingly unstable and unable to react swiftly to spikes in demand,” adds Huq. “By identifying suitable partners, sharing resources and knowledge and developing strong relationships with suppliers and network ties, firms will be able to leverage each other’s capabilities and be in a stronger position to deal with changing consumer preferences and offer rapid response if there is a shortage of critical products.”
Spontaneity is counter-intuitive for supply chain professionals where careers are built on planning, optimisation and efficiency. To build resilience against future supply chain shocks, that will need to be turned on its heads. “Firms will have to use spontaneous supply chains and be prepared to evolve rapidly,” says Huq.
Agility, capacity and visibility
According to Dominic Potter, General Manager, International, Logistyx Technologies (pictured below), for many of its customers, the pandemic highlighted the absolute importance of supply chain agility, carrier capacity and shipment visibility. “At the start of the pandemic, the shift to e-commerce meant many of our customers faced carrier capacity limits,” Potter recalls. “We were able to help them swiftly and seamlessly grow their available carrier services to source additional capacity by leveraging Logistyx TME – our multi-carrier shipping technology – which features a library of more than 550 carrier integrations.
“In addition, with all but essential physical retail outlets shut, our customers used our technology to move inventory to stores where necessary, enabling greater omni-channel fulfilment capabilities including click-and collect and ship-from-store.”
Now, as we hit a perfect storm of driver shortages, network capacity issues and the recent fuel crisis, we are seeing another change. “Carriers are demanding more loyalty from customers, and those with lower volumes are suffering, as carriers prioritise shippers with the highest volumes,” Potter reveals. “The
carriers know they can resell capacity at a higher price, so for shippers, this is not the time to onboard new carrier partners.”
In response to this, Logistyx is helping customers embrace the full suite of services from a smaller selection of carriers, rather than using complex rate shopping to pick and choose a small number of different services from a wide range of carriers.
“For online shoppers, this means choice and flexibility in shipping options at checkout is reduced,” Potter says. “For fashion retailers, for instance, offering a one-hour delivery service is not sustainable in the current market. However, despite the lack of same- day/next-day shipping availability, it’s still important for shippers to give customers reliable delivery times, with the capability to track their package and receive early notification of delays. It’s also critical the returns process is as easy as possible.”
Looking ahead, Potter says customers will continue to demand convenience, so the basics will remain the same: have an agile carrier network and provide real-time visibility of shipments, from the point of departure to final delivery. “Multi-carrier shipping software meets both needs and gives shippers the capability to offer omni-channel fulfilment options to build resilience and flexibility and ‘pandemic-proof’ (as far as possible) the supply chain.”
Communications
If nothing else, the past year has taught us the value of a steady supply chain – and just how quickly an unexpected event can throw things into turmoil. For companies operating in transport and logistics, Kristian Torode (pictured below) suggests that a comprehensive communications setup could be the difference in smooth-running and delay-free operations.
“Consumer-facing brands were forced to rapidly change their strategies to accommodate accelerated growth, and many were successful,” says Torode, Director and Co-Founder of Crystaline Communications. According to GlobalData, nine of the world’s top 10 e-commerce companies reported double-digit growth in revenue over the pandemic, although this didn’t come without some teething problems. “The start of lockdown came with several weeks of empty supermarket shelves, as panic buying struck the nation.” Communication proved essential, but how can companies upgrade their current setup?
The tide is coming
One of the key aspects for Bashir Khan, Business Development Manager at CarrierNetOnline (a service of Deltion), is that companies have to adapt their supply chains or potentially not meet their customers’ expectations. “Those that are able to rise to the challenge will be the winners,” he believes. “The implications for the supply chain are that components will need to be sourced in different ways to ensure customer demands can be met – companies are therefore diversifying their suppliers to ensure that regional or modal impacts are minimised.
“Manufacturing will need to adjust their just-in-time approaches to deliver efficiently but with the JIT aspects being delivered across the supply chain,” Khan notes. “Smart logistics providers are now working with customers to enable product to be allocated at the last instance, ensuring more efficient production practices can be introduced – longer production runs.”
Transport, he adds, will also need to reduce reliance on a single mode. “There are examples of trains being used to source product for the UK from China rather than use deep-sea routes or a grocery retailer increasing its use of trains within the aspects of the supply chain that it controls.”
Innovation, he concludes, will drive newer ways of utilising economies of scale and scope to deliver benefits. “One company is using its visibility across its supply chain to introduce a new transport operation that collects from suppliers to secure its supply and to deliver this at an effective rate due to its size to the benefit of all,” Khan reveals.
“With modern technology, including Software as a Service (SaaS), many methods of integration, use of AI, there is no reason that manually driven paper-based operations need to happen,” Khan says. “Those that do not transform their operations to be fit for the 2020s will become ‘not fit for purpose’ and relics of the past. It should also be recognised that the need to address climate change issues will only exacerbate the complexity of requirements and further require innovative solutions. As per King Canute, we should recognise that the tide is coming.”
“One of the most valuable qualities for a transport and logistics communication setup is accessibility,” believes Torode. “Information needs to be available to employees, no matter where they’re located. Opting for a cloud-based IT system – where inventory, finance and other in-house systems are all kept in one space – is extremely effective, allowing employees to access all information in real-time.”
Key questions
A number of questions have arisen from the pandemic that many in the sector are asking themselves. For instance, is it time to further diversify your supply chain? Should you be embracing localised manufacturing? Or making investments in digitising your supply chain? And what can be gained
from making your supply chain more customer-focused?
An ever-growing concern in the market is the delays caused by the pandemic, especially among retailers. Lead times are constantly moving, and replenishment is a nightmare. As a result, a noticeable trend in supply chain diversification and optimisation is therefore emerging.
“Corporations are opening global procurement positions as a strategic way to counteract current issues,” reveals Alex Ramirez, Director, Client Solutions & Global Strategic Accounts at Advatix (pictured below). “Many companies struggle with a long backorder log. They are having a difficult time procuring products or getting them into their DCs. We are living in challenging times for order fulfilment because of the supply chain problems caused by Covid-19. This is a deep and complex issue affecting companies everywhere.”
As for localising manufacturing – nearshoring or reshoring – Ramirez says this is a question many companies are asking internally. “But the answer is not as simple as it might look initially,” he notes. “With some products, such as apparel, household and even some F&B items, local or same-region manufacturing might be possible in a reasonable time period (but it will still take some time). Other products, such as those requiring high technology integration, might also benefit from local manufacturing, but expect a few years to accomplish this.”
Ramirez says he has always encouraged companies wanting a clear path to the future to digitise their supply chains, adding that companies fully embracing digital transformation have an advantage over those
still thinking about it. “But this is a tricky endeavour,” he stresses. “It is a cultural issue more than a technical one. Authority to embrace digital transformation must come from the very top. Otherwise, it is challenging.”
The next step, he advises, is to look at all data generated by the company. “The way most companies operate today is in data silos, making data difficult to obtain, confusing and of little value,” Ramirez explains. “A central platform of clean and structured data is a must. Data is the new gold!
“When this structured data is applied to the supply chain, it can provide actionable insights. In other words,
you could foresee what will happen across the supply chain and react way before it happens.
“I cannot see a company succeeding in the future if they continue operating the way we have done it for the past 100 years,” says Ramirez. “We truly are in the middle of a revolution. Look at Amazon. The moment it transformed and began operating digitally, it took off! It is what it is today because of the transformation it started around 2006. And on its way to success, it formed what is known as ‘AWS’ – a cloud service that most companies are familiar with now.”
Automate to retaliate
For Simon Jones, Head of UK & Ireland at 6 River Systems (pictured below), the disruption resulting from the pandemic increased the need for transparency. “The challenge is quickly collecting the right data and using it to make evidence-based decisions at every stage of the supply chain. The warehouse is no exception to this. Embedding technology into the supply chain makes it easier to collect such data. For example, collaborative robots increase picking accuracy and productivity in warehouses while constantly updating AI-driven systems on their progress.”
What Covid-19 did show us is that global supply chains are fragile and slow to respond to changes in demand. “We need to plan and respond differently in the future,” Jones insists. “Some things won’t change. Consumers will always want low prices. The challenge for companies is to make supply chains more resilient without weakening competitiveness. To meet that challenge, managers should uncover hidden risks. It is important to audit your fulfilment infrastructure – be that automated or manual – to ensure that it has the flexibility to bring on new capacity and adapt to market changes quickly.”
We all know how e-commerce took off dramatically during the pandemic, with many claiming it accelerated trends by a decade or more. What remains unclear is how much of that volume will be retained at the expense of stores. Despite some initial high footfall figures, shoppers do not appear to be returning to retail stores in consistently high numbers.
“This demonstrates the importance of flexibility in fulfilment to an even greater extent,” insists Jones. “If you are unsure what proportion of your revenues will come from e-commerce in relation to in-store sales, it is almost impossible to make a multi-decade commitment in fixed automation to support your supply chain to the customer. The growth in e-commerce during Covid-19 highlighted the drawbacks of not having really adaptable warehouse fulfilment. However, the real challenge is how to accommodate a volatile environment in the future.”
Delaying the decision to automate is not a realistic option due to increasing costs resulting from inflation and widely publicised labour shortages in the supply chain. Companies are having to look at more flexible and scalable solutions that can accommodate varying proportions of e-commerce and in-store sales. “On top of this predicament,” Jones says, “the operation has to keep ahead of ever-rising customer service expectations and the need to make stores more of an experience rather than a warehouse with shelves. Many retailers are reducing storage space and stock levels in store in order to have more space to create a shopping experience. This means they have to replenish more often. This is even more reason why flexibility needs to be a top priority in operations.”
Pivoting quickly
Covid has also shown us that adaptability is key to overcome disruption (see The tide is coming sidebar). “If there’s one post-pandemic lesson to be learned, it’s that they must have the capability to pivot quickly – not only as it relates to what they do but where and how they do it,” states Derek Curtis, Vice President Sales Retail Execution Software at Körber Business Area Supply Chain. “Survival in a post-pandemic world depends upon reacting and being adaptable to unforeseen circumstances. And being prepared for absolutely anything: reducing stockouts; offering new package sizes; switching from a B2B to B2C model, even if temporarily. Without the right supply chain systems in place – whether technology, processes or infrastructure – you’ll struggle to compete and to survive.
“At the end of the day, the pandemic permanently altered the way many consumers shop, forcing companies to change their supply chains to conduct business and survive,” Curtis feels. “There were circumstantial winners – such as producers of face masks and hand sanitisers. There were those who needed to quickly pivot to expand their customer base, even temporarily – like companies that supplied goods to restaurants, many of which temporarily or permanently closed.”
But circumstance does not necessarily define the outcome. “Those with the capability to adapt and pivot were winners not only during the pandemic but going forward as well,” Curtis suggests. “Being able to pivot from a nearly disastrous situation to a positive one is doable with the right technology, process and infrastructure. Similarly, the capability to start with a good situation to secure an even larger market share is doable with the same three things – the right supply chain technology, process and infrastructure.”
So, regardless of what’s coming down the supply chain pipe, make sure you can react, pivot and adapt. Doing so just might open your company up to new brand customers, lines of business and revenue streams.
