The Covid-19 pandemic has forced countries to re-look at the international trade policies, which were pivoted around free trade and global supplies. As a result, these countries are looking at creating sourcing of items locally, which will fuel re-balancing of international trade. Piyush Chowhan, Group Chief Information Officer, Lulu Group International, enlists four big themes to align and transform the global supply chain.
WE live in a VUCA world COVID has challenged every part of the global ecosystem. Globalization was the key theme for the last few decades, which made the world look flatter and interconnected. Countries relied on each other for a lot of essential supplies like food, drugs, electronics, and fashion from low-cost manufacturing destinations. This helped fuel economic activities by boosting global supply chains and making international trade a key economic policy. It also helped a lot of developing economics be part of this global ecosystem and build their growth stories around exports. With airspaces being blocked and international borders closed, COVID-19 pandemic has proven to be the biggest disruptor of this globalized supply chain.
The pandemic has shaken the resilience of all the global players. Food supply chains and pharmaceutical supply chains were curtailed leading to strain in food availability and medical supplies in large parts of the world. With this disruption, lot of countries are trying to re-look at the international trade policies, which were pivoted around free trade and global supplies. A large number of countries are looking at creating sourcing of items locally, which will fuel re-balancing of international trade. Local Food security and nationalist themes, which are being played in large parts of the world will have a longlasting impact on this global supply chain. There are four big themes, which need to be understood in detail to align and transform this global supply chain.
These themes will help supply chain leaders to create a strategy, which will enable this transition much better.
Re-shoring of supply chain
The re-alignment of sourcing from international to local boundaries will make significant changes in supply chain strategies. The changes in lead times and cost models will need to be re-worked based on these new localization paradigms. This transition to “re-shoring” will not be easy as creating manufacturing back in-home country is not simple and has its own complications. While not all countries have the necessary policies and labor to bring back all manufacturing, and in these countries “near shoring” will be the answer. These changes will have very drastic impact on cost of goods sold and hence the entire business models need to be re-worked to make this economically viable. This will also depend on the type of good manufactured where availability of raw material will be of key determinant in this change. Creating sourcing pipelines for electronics, fashion, automobiles, and pharmaceuticals is going to be very complex and organizations and countries need to make calculated steps without haste and populistic sentiments.
Agile supply chain
The ability of supply chains to absorb shocks and react to situations without disruptions are needed in this VUCA world. The resilience of supply chains was at test during COVID-19 and not many were able to steer the dynamic changes required. Industry 4.0 requires the supply chains to be re-modeled with use of technology. The trend would be to move away from very large monolithic logistics hubs to more nimble micro-fulfillment models, which have better ability to react based on changes in demand. Digital Technologies will play a very critical role in making transition from rigid to “Agile” supply chains.
Trust based supply chain
Its evident that agility in supply chain can be achieved only where there is extreme trust amongst the supply chain partners. During COVID-19, a lot of fashion organizations cancelled confirmed orders, which led to mass layoffs in countries like Bangladesh and others. Such events break the trust amongst supply chain partners, which makes relationships very brittle. We have been talking about transition to Digital Platforms and Digital Ecosystems, which will drive economic activity in the future. Trust amongst these supply chain partners is going to play an extremely critical role for these ecosystems to work efficiently in future. “Ethical Sourcing” and “Trust” are going to be the biggest differentiators to create agile supply chains, which will
be ready in this dynamic ever-changing world. Bringing transparency across the partners with the help of technology is going to a very important way to build trust amongst these partners.
Digital supply chain
We are living in a Digital era where innovation and technology are going to be the key ingredients of digital supply chain platforms. There are lot of technologies like Image Recognition, Blockchain, Robotics and Sensing technologies which will enable automation of activities to reduce cost and time of movement of goods. These technologies must be tested with the relevant use cases for each supply chain ecosystem to create speed, agility and trust in the supply chain partners. Supply chain managers need to redefine supply chain cost models, which will be quite different from traditional models. Digitalization of supply chains is required and once we take a holistic approach towards this transformation, we can really create a digital avenue for organizations to stay competitive in this fast-changing world.
Getting Future Ready
These themes will help organization re-pivot their supply chain strategies and make them shock resistant for the future. As part of the transformation journey, organizations need to build the below capabilities to enable ride this wave:
Data Platforms – Supply chain data is scattered, and it requires a holistic approach to bring all the data together to get holistic views. Data, which is the new oil for making processes efficient, will play a pivotal role in this transition.
Digital Workforce – Supply chain managers need to be more digital evangelist to lead this transition rather than letting someone else take the lead. This workforce transformation of supply chain organizations is required to make this change smooth.
Innovation Mindset – It’s important that we allow grassroot and frugal innovation models to be propagated in the supply chain organizations. These will help in creating a platform for experimentation and learn to be ahead of the competition.
Supply chain transformation will be accelerated post-COVID-19 and the above themes and capabilities will surely help in making the transformation smoother. Let’s all work towards making a Digital Supply Chain, which is agile and innovative to be ready for the future.
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