In the year 2011, the catastrophic Tohoku Earthquake and Tsunami resulted in a massive US$210bn in costs for Japan. The Supply Chain got disrupted and they were unable to import or export the needed parts required in manufacturing. Companies like Toyota, GM, and Nissan all closed down their facilities temporarily in Japan and the United States.
In the year 2017, Puerto Rico was struck by Hurricane Maria, the supply chains of two of the island’s most important industries, pharmaceuticals, and medical devices, were grounded to a complete halt. It was a whopping US$90bn damage.
And standing in the year 2020, while the Coronavirus cases cross the million mark worldwide, we are clearly understanding natural disasters are not new, but we are going to face much bigger damage worldwide this time.
Has really COVID-19 appeared as a “Black Swan” that finally will force many companies and entire industries, to rethink and transform their global Supply Chain model?
Till COVID 19 hit us hard, major businesses or companies who sell finished goods generally had knowledge or clarity about production and shipment schedules for their Tier 1 suppliers only. They were unaware of the suppliers further down the chain. And this lack of transparency was there even if they had previous experiences of being in catastrophes in the past. This ignorance also resulted in delays and other complications in ’ global supply chains during this COVID-19 pandemic, highlighting how vulnerable many companies are unprepared for disruptions. Companies who did not have a proactive plan for this kind of Natural disaster have been caught off-guard and they are learning their lesson from this crisis, the hard way.
The current supply chain disruption is impacting consumer demand, labour, materials, and delivery—forcing businesses that rely on global sourcing to make tough choices. According to a recent PwC survey of finance leaders in the U.S. and Mexico, 31% indicated supply chain issues as one of their top three concerns related to the COVID-19 outbreak.
COVID-19 has led to lockdowns all over the world, manufacturers in the chain are temporarily ceasing productions since they are not receiving the required raw materials or components for further production. Products produced before COVID-19 breakout sits in the warehouses today finished and unshipped, simply because of the travel restrictions, especially across borders. And this level of disruption in the supply and demand chain of such magnitude is mainly due to lack of visibility, accessibility, transparency and a timely coordinated effort.
In contrast, Companies that have already invested in transforming their system into a digitized Supply Chain emerged better prepared. They have better visibility into the whole structure of their supply chain. They do not need to experience the last moment hassles as they have the holistic information at their fingertips. They know exactly which suppliers, sites, parts, and producers are at risk. These allow them to put themselves first in line to secure constrained inventory and capacity at alternate sites.
Printer and Ink company, Hewlett Packard(HP) is one of such winners in the market. They have their manufacturing units distributed across several different countries. Local manufacturing centres made their business run better even when the world is locked down and Supply Chain remained un-disrupted.
The Retail Industry has seen major disruption damage when they were faced with a huge panic buying, the result was empty shelves and a chocked Supply Chain. Not only that, but there has also been a shift of customer segments from purchasing offline to online, and more consumers started shopping online for the first time in new categories. But due to the lack of customer data and product information, most companies lack the required insights for visibility and planning. This led to bad shelf-management, supplier delivery prediction delays, pandemonium in stores or a pile of perishable goods in-store.
But what will create this visibility?
Getting digitized, using Artificial Intelligence can create better visibility of the operation and help in better planning of demand management, supply planning, and control tower visibility. These digitized Control towers will set up a virtual control room with live tracking of global supplier’s health, inventories, cost of goods, production plans, shipments, routes, demand and external risk hot spots. Your legacy system might allow you to get partial visibility sometimes, but they will still lack the necessary insights and predictive capabilities essential for inventory, demand and supply co-relation.
With complete end to end omnichannel trade and commerce management platform, the Artificial Intelligence platform will open and optimize foreign market access and new sales channels while managing all backend retail operations such as E-Commerce Management, Supply Chain Management, POS and Shipping. And these will help you to avail of the necessary predictive capabilities essential for inventory, demand and supply co-relation especially in critical situations like COVID 19.
In a study, Boston Consulting Group found that adopting digital supply chain technologies helped companies achieve, on average, 10% higher product availability and a 25% faster response to market changes compared to companies lagging in digitization.
Most of the Procurement activities include cost-saving methods, which means obtaining supplies at the lowest cost possible, provided they fall within specified quality parameters. When the procurement function has to resort to extraordinary measures to secure supplies on time by expediting shipments or purchasing parts or materials at a premium, the higher costs are assigned to other parts of the organization, i.e. logistic functions in the case of expedited shipments and the finance function in the case of premium prices for raw materials and parts. But when you have a digitized Supply Chain system, it will enable virtual warehousing and will let you decide and plan a better cost-effective logistics system.
One of the market leaders, Vdezi, an advanced Artificial Intelligence (AI) based Omni-Channel enabler makes all these possibilities positive. Vdezi has a unified platform that can help a company to access the Global market through 25+ channels of sales in 100+ countries through a single dashboard. Their system is like an ecosystem, where localised shipping, virtual fulfillment and translations are easier than ever. Artificial Intelligence made forecasting, analysing and optimisations of business processes more accurate and ensures operations management at a much lower cost. This helps your company to increase customer retention while reducing CAC and CRS and reduce the cost for warehousing. And all these features will help the company achieve greater revenues, the efficiency of operations with more actionable insights besides reducing costs.
Through five key steps, Vdezi’s digitized Supply Chain platform can bring about the capabilities of Real-time Inventory visibility, Seamless Inventory Deployment, Smart Operation, Agile Distribution Network, and Distributed Order Management into your system in this critical situation.
Experts are predicting that after the COVID-19 crisis dissipates, the market will see companies fall into one or two categories. There will be those that don’t do anything, hoping such a disruption won’t ever happen again. And another type of company who will heed the lessons from this crisis and make investments in mapping their supply networks so they do not have to operate blindly when the next crisis will strike and rewrite their contracts so that they can figure out solutions when disruptions occur. And in that light, we would like to quote Mr George Bailey, MD of Digital Supply Chain Institute “Treat the impact on supply chains not as an aberration, but as an expected occurrence in a world where political disruptions, health issues, technology advances, and climate change are all happening at the same time” and accelerate your adoption of a true Digital Supply Chain.