What Does Supply Chain Optimization Mean Now Vs Pre-COVID?

The COVID-19 pandemic changed our lives in multiple ways and the world realized that several areas needed attention, especially in the way the world was doing business. Unless the catastrophe struck, things seemed alright, but the pandemic revealed the kind of loopholes several systems had. This has been equally true for the global supply chain management. As the pandemic took the world by surprise, the supply chain witnessed a kind of disruption that was of a different scale altogether. Several logistics companies realized that the areas of weaknesses like unstructured risk and compliance management, higher operating costs, proactive decision making, fragmented technological usage, lack of process integration, and inefficient usage of resources needed a fresh outlook. 

And now it seems that there needs to be a major paradigm shift in the way businesses are handling their workload and rethink the strategies especially in areas like risk management, demand management, cost optimization, and operational efficiency. Supply chain management factors, that were hitherto considered unimportant are now being looked into with utmost care and attention that is sure to change the way the supply chain management is handled from now on. The kind of experiences businesses have had in the last year reinforces the idea that supply chain optimization is the need of the hour and that it won’t be the same as it was in the pre-COVID era. 

Weak links exposed by the COVID-19 pandemic

For the longest time, the classic supply chain optimization concepts worked for logistics companies across the world, until the entire chain was disrupted. And now these companies are looking at disengaging with traditional practices and bringing about a sea change in the way the logistics companies operate the world over. Now, these companies are adopting new ways of doing business. Factors like lowest-cost production in developing countries, lean management, outsourcing, single sourcing, and just-in-time manufacturing are taking center stage. But what the world learned from the pandemic needs to be understood.

Global stability: The global supply chain cannot sustain without global stability and it was assumed that things will remain unchanged even though indicators were highlighting the need for a complete overhaul of the system.

Over-reliance on low-cost suppliers: Low-cost suppliers were seen as the future of a stable supply chain globally. It was never assumed that things might go downwards due to this over-reliance as some of the major market shareholders in the logistics sector had already started feeling the brunt. Countries like the US witnessed a 10 percent drop in their global manufacturing share as China became the go-to place for several businesses due to their low-cost services.

Lack of reliable shipping and transportation: The global supply chain heavily depends on a stable and reliable shipping and transportation network, which came crashing down due to the COVID-19 pandemic. It opened the pandora’s box of several irregularities that were ignored in the pre-pandemic global system.

Why new supply chain optimization strategies are needed

Now that the world has woken up to all the new challenges that supply chain management is facing, it is high time global giants started rethinking and re-strategizing their supply chain optimization policies. While things will not be as homogenous across the world and every nation will need to devise its own strategies, some of the basic principles can remain the same:

• Build a supply chain that can withstand shocks
• Rethink single source strategies
• Production should be shifted
• Having multiple sourcing strategies 
• Be prepared for more such shocks

While these are some of the very basic strategic changes businesses can adapt to, there are several other pointers that need serious consideration:

• Create a clear and transparent supply chain system by establishing a list of critical components, identifying the origin of supply and alternate sources 
• Put in place a system that can support continuous production even in the case of a global pandemic. This can be ensured by having enough spare supplies across all industries 
• Optimize the capacity of production and distribution, employee safety, alternate work arrangements, etc. This will enable companies to know the current and future production capacity
• Identifying and securing logistics capacity so that things can be scaled accordingly in the future 
• Micro-managing finance so that it can be estimated where the supply chain disruption will impact a company’s financial stability

As the world wakes up to new challenges in supply chain management, it is time to rethink from the start. The best way to do this is to leverage technology and automation to makes the entire transportation and distribution process more streamlined and affordable. Usage of advanced analytics can be the key here in changing the way logistic companies do business in the future. It is also important to now keep the industry ready for another similar catastrophe so that such a disruption doesn’t force the industry to go down without a fight. 

This global pandemic has also taught all of us a big lesson that it is time to identify the limitations and chart out steps to overcome them. Not addressing some of the most blatantly, staring in our face issues. It is time to face them and find scalable solutions. Only then can the world be made pandemic proof, especially the global supply chain management. 

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