Resilience360 and BCI Report highlights impact of pandemic impact on supply chains

The latest report from Resilience360 and Business Continuity Institute (BCI), entitled “COVID19: The Future of Supply Chains” shows the devastating impact the pandemic has had on supply chains, with 73% of organizations encountering “some” or “significant” detrimental effect on the supply side.

It comes from a survey of 350 global manufacturers and retailers, observes Resilience360 chairman David Shillingford.

Most organizations were unprepared for the pandemic from a planning perspective: Less than half of organizations (49.5%) reported having a plan in place that sufficiently covered them for the supply chain issues encountered during the pandemic.However, the difficulties that arose as a result of not having sufficient plans in place has prompted many organizations to change their documentation going forward: 53.2% plan to write a comprehensive pandemic plan, and a further 32.3% will adapt current plans to ensure they cover supply chain issues in enough depth.

Supply and demand were affected badly during the pandemic, but there were still some winners: Nearly three quarters of organizations (73.0%) encountered some or significant detrimental effect on the supply side, with 64.8% reporting the same on the demand side. One in five organizations, however, reported an increased demand for their products and services. IT, telecommunications and pharmaceutical organizations, for example, noticed an increased demand, whereas other organizations launched new products and services geared to catering for differingcustomer needs during the pandemic.

The pandemic has caused many organizations to carry out due diligence deeper in their supply chains going forward: Although organizations had largely carried out good levels of due diligence (such as determining suppliers’ location and obtaining business continuity plans) amongst their tier 1 supplier base, such due diligence started to tail off beyond tier 2. The pandemic caused disruptions to many organizations’ supply chains beyond tier 1: many European based manufacturers, for example, are heavily reliant on Asia for components which caused issues for many organizations’ tier 1 suppliers. As a result, nearly two-thirds of organizations plan to perform deeper due diligence going forward. Good practice suggests that such due diligence should happen pre-contract phase so organizations can be aware of any potential issues (such as over-reliance on a particular geography) before engaging a supplier.

More organizations are using technology to help them perform the required due diligence: There has been a discernible increase in the use of technology during the pandemic to help with supply chain planning and strategy: 57.1% of organizations are using their own internal systems and spreadsheets for supply chain mapping, whilst 13.5% are using specialist tools – a notable uptick on the 22.6% recorded in the BCI Supply Chain Resilience 2019 report. Furthermore, of those who are not currently using tools, a fifth are now considering purchasing a specialist tool.

More than half of organizations intend to diversify their supplier base post-pandemic, with the Far East set to become the biggest casualty: 57.2% of respondents are looking to diversify their supplier base post-COVID-19 and, for many organizations, this means reducing their reliance on the Far East. 29.9% will source less from the Far East, with a further 13.2% sourcing less from China.

Local sourcing will become more mainstream: Two-thirds of organizations (66.2%) plan to source goods more locally post-pandemic, with a fifth (20.8%) reporting they will move a considerable number of suppliers more locally. Although a further fifth will be engaging in more stockpiling post-pandemic, many are using local sourcing as a more cost-effective way of ensuring goods can be acquired quickly and efficiently.

Third-party logistics is set to be a beneficiary of the COVID-19 crisis: 12.4% of organizations intend to increase their use of third-party logistics post-COVID-19. Third party logistics can help negate the need to employ large numbers of warehousing staff on payrolls which, during a pandemic, is more of a risk than an asset to many organizations. Using a third-party provider also helps to negate the need for an organization to build out its own supplier network at a significant cost. In an exclusive interview with SCMR, Shillingford further noted that the establishment of Foreign Trade Zones can have an impact on the network risk profile.  “For example, the creation of an FTZ may lead to the development of logistics clusters which change the network risk profile.  An industrial cluster generally means fewer miles traveled between nodes, which reduces transportation risk.  Whereas, conversely, it also creates industry-specific risk concentration because multiple suppliers are in the same place which would increase the impact of a major event such as a natural disaster or a pandemic.”

COVID19: The Future of Supply Chain (https://www.resilience360.dhl.com/wp-content/uploads/2020/07/20200714_The-Future-of-Supply-Chain.pdf)