The average consumer became painfully aware of what supply chain resiliency meant in 2020. And unfortunately for many businesses, COVID and its cascade of risk events proved to be the perfect storm for supply chain disruptions. Traditional risk management approaches were unable to keep up with the rapidly evolving supply chain risk landscape.
Many retail and e-commerce businesses were forced to rely on limited and outdated information for their suppliers. As a result, they faced critical shortages and significant disruptions in their supply chains.
Enabling better resiliency requires modernizing supply chain and related risk management approaches, not implementing more of what didn’t work.
Before we can determine which investments to prioritize in 2021, it’s critical to understand where current practices failed. Because, let’s face it, we’ll get past the COVID crisis, but as disruption risks are increasing in frequency and severity, the need for resiliency is here to stay.
After a tumultuous couple years, what trends can wholesale distributors expect now? Watch for continued supply chain disruption, increased competition, and a talent shortage.
There were three key lessons that arose via the pandemic – and these are crucial to improving supply chain resiliency moving forward:
Resiliency requires proactive risk mitigation actions. Since you can’t proactively mitigate what you don’t see coming, an early warning of changes in your risk landscape is critical.
Static assessments, health reviews, and risk reports prepared in the year or even months before COVID proved to be stale and ineffective as the risk landscape rapidly evolved.
Retail and e-commerce companies with a continuous monitoring capability had a greater understanding of their supply chain in real-time enabling more resilient responses than those relying on stale assessments.
The coronavirus has revealed faults in the global supply chain, as companies are discovering that resiliency requires insight and agility.
Resilience requires a comprehensive view of the entire risk landscape – not just financial or cyber risk. Let’s use COVID to illustrate this point.
COVID started as a location-based risk in Wuhan, China before it rapidly spread around the globe cascading into people risks (i.e., absenteeism), regulatory risks (i.e., mandatory shutdowns), cyber risks (i.e., non-secure work from home environments), infrastructure risks (i.e., local healthcare and internet availability), and finally financial risks as suppliers’ revenue was impacted.
In this instance, companies reacting only after a supplier experienced financial trouble would have been an ineffective risk mitigation approach that would have left them behind their competitors who were proactively monitoring a wide range of supply-chain disruption risks.
The impact of the pandemic is upending global food production and distribution, revealing coronavirus food supply chain fractures.
For many businesses, 2020 brought a new awareness of additional weak links in their supply chain from 4th or 5th parties (often called Nth parties), with the potential to challenge the effectiveness of their overall supply chains. Companies that had a view deep into their supply chains beyond their direct suppliers to include their Nth parties had an advantage of those who did not when managing the supply-chain challenges of 2020.
Supply chain risk management must be a priority for the global supply chain industry, especially with the start of the US hurricane season, which forecasters say will be dangerous.
As supply-chain resiliency requires a comprehensive view of risk and knowing in real-time when the risk landscape changes, companies should prioritize the adoption of continuous supply-chain risk monitoring across a wide risk framework.
COVID-19 is accelerating the move towards Industry 4.0 technologies like the Internet of Things (IoT) and edge computing.
The risk framework must monitor supply-chain disruption risks beyond financial to include supply-chain disruption risks such as cyber, governance, regulatory, environmental, societal, operation, compliance etc. and location risks such as political, infrastructure, extreme weather, infectious disease, social unrest, etc. An ideal continuous monitoring solution also should incorporate Nth parties.
While improving resiliency is critical, unfortunately, many companies are currently experiencing considerable financial pressure and feel limited in their ability to make new investments. As an alternative, companies can shift budgets from old ineffective practices to these new proactive approaches.
It was clear during 2020 that retail and e-commerce supply-chain resiliency had a direct impact — not just on operations, but on the revenue of these businesses. Companies that recognize the shortcomings of old practices and evolve to a modern, proactive supply-chain risk management approach of continuous monitoring across a wide risk aperture will reap the benefits of improved supply-chain resiliency well into the future.
