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Navigating the New Normal in Supply Chain Management

20th Mar 2024 - 3 min read

We're already in a brave new world for global supply chains

The COVID pandemic's lasting impact on global supply networks has ushered in a new era of reshoring, technology, the 'Just-in-Case' revolution, and a once-in-a-generation opportunity to rethink supply chain management

Since the COVID pandemic, supply chain management has been irrevocably altered—exposing vulnerabilities in the deeply interconnected and intricate networks that power the world's economy.

As businesses grapple with the aftermath and ongoing challenges affecting supply chain resiliency, they must also navigate significant shifts towards reshoring, technological advancements, and a strategic pivot from just-in-time to just-in-case inventory models, marking a new era in supply chain management.

Reshoring and Geographic Diversification: A New Priority

As our local supermarket shelves attested, the pandemic's disruptions underscored the perils of overreliance on geographically concentrated supply sources. With entire regions going into lockdown, companies worldwide faced severe shortages of essential goods, from medical supplies to consumer electronics. In response, a notable trend towards reshoring has brought manufacturing and production closer to home.

Surveys indicate that many U.S. and European companies plan to reshore part of their production from Asia in the coming years as a critical strategy for mitigating supply chain issues.

This shift is driven by the desire for more control and less disruption risk and by governmental incentives and commitments from major retailers to buy more domestically produced goods.

Additionally, companies are diversifying their manufacturing bases beyond China, with India and Vietnam becoming increasingly popular alternatives.

Technological Revolution: Enhancing Visibility and Resilience

One of the pandemic's stark revelations was companies' lack of technological preparedness to manage their supply chain disruptions. Before the crisis, many businesses needed more visibility into their supply networks, exacerbating the impact of these disruptions.

The post-pandemic landscape has seen a surge in technological investments to increase supply chain resilience. Advanced software for supplier communication, artificial intelligence for decision-making and logistics management, and robotics for process automation are among the key technologies being adopted. This digital overhaul is about mitigating risks and improving efficiency and adaptability in a volatile global market.

From Just-in-Time to Just-in-Case: Rethinking Inventory Management

The just-in-time inventory strategy, which minimises stock levels to keep overheads at the absolute minimum, showed its limitations during the pandemic. Disruptions led to significant shortages and highlighted the dangers of lean inventories.

Consequently, businesses are increasingly transitioning to a 'just-in-case' model, opting to carry more inventory to prevent shortages. While this shift entails higher costs and potential inefficiencies, it's seen as a necessary buffer against the unpredictability of global supply chains.

The move towards more extensive inventories reflects a broader reevaluation of risk management practices in supply chain strategy.

Worker Availability and Labor Management Challenges

The pandemic severely impacted the human element of supply chains, particularly worker availability. Lockdowns, illness, and the need for new health protocols led to workforce shortages, further straining delivery schedules and production capabilities. Addressing these labour challenges requires innovative approaches to worker safety, flexibility, and management, underscoring the importance of human resilience in the supply chain equation.

However, the technological leaps mentioned under the 'Technological Revolution' heading above counter this shift towards improved labour practices.

The rapidly developing advancements in AI and automation are enabling companies to turbo-boost productivity while reducing headcount. This trend is likely to accelerate markedly over the coming decades and will have a significant impact on the supply chain workforces and their managers.

An opportunity to design for sustainability AND resiliency

As we navigate the post-pandemic world, the lessons that were quickly learned are shaping a new paradigm in supply chain management.

In the face of these changes, we have the chance to reflect on our current supply networks and their impact on our planet and our society.

The shifts towards reshoring, enhanced technological infrastructure, just-in-case inventory models, and improved labour practices offer us a once-in-a-lifetime opportunity to have sustainability principles inform the development of more resilient, efficient, and sustainable supply networks.

These strategic adjustments, while born out of necessity, may well define not only the future resilience of our global supply chains but also the future resilience of our communities and ecosystems.

Filed under: Data & Analysis

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