covid-19 revealed the fragility of supply chains
As the pandemic unfolded, it quickly became clear that restrictions of different severities would be implemented globally. Consequently, a surge in demand for toilet paper – and, to a smaller degree, paper towels and tissues – occurred. Retailers unexpectedly experienced shortages of this essential household item.
The extent of this consumer preparation was unprecedented, and existing supply networks were unprepared to respond. These networks continued operating at their normal pace, resulting in a disparity between available goods and consumer needs.
As the pandemic progressed, this scarcity of essential items extended to frontline personnel, who were forced to exceed recommended usage limits for their personal protective equipment (PPE). This highlighted the impact of a rapid shift in demand on supply chains. Businesses started adapting their manufacturing processes to create protective gear and hand sanitizers, motivated both by potential profits and the necessity to address supply shortages.
Both governmental bodies and private companies were actively seeking solutions, with numerous proposals from prospective suppliers being circulated.
Obtaining a comprehensive understanding of the market during this time proved challenging, as inconsistencies in product quality, difficulties in identifying reliable vendors, and volatile pricing contributed to widespread disruption. Tracing the source of manufacturing and obtaining data regarding quality control measures at production facilities was extremely difficult. The market became saturated with substandard and counterfeit products, prompting the publication of introductory guides to supply chain organization.
The public began to recognize that the existing system lacked the resilience to withstand such a significant disruption.
Current corporate sourcing approaches are facing difficulties
Recent events have demonstrated a limited degree of control that businesses typically exert over their supply networks. Typically, organizations possess only a basic level of preparedness for potential disruptions involving their direct, or tier one, suppliers. This likely explains the widespread difficulty in obtaining products like the Xbox Series X or PlayStation 5 during the recent holiday period. The creation of these items relies on a diverse range of parts and materials sourced from numerous locations.
The processes involved – from the initial processing of external materials, to the application of coloring, the use of plastic components, and the pursuit of economical manufacturing locations – all present potential sources of production slowdowns when circumstances deviate from the norm. A detailed examination of a gaming console reveals a highly complex network encompassing numerous businesses, procedures, materials, and nations.
Complete insight into the origin and progression of each component within a gaming console, presented as a detailed digital record showcasing all materials, personnel, companies, and geographic locations, would allow for the identification of weaknesses within the supply chain.
While all these materials and components ultimately integrate into the supply chain, the specifics of their journey are often undocumented. This lack of accessible information hinders both companies and governments in their efforts to develop robust risk mitigation strategies for global events that disrupt supply lines. A significant shift is currently underway, largely unnoticed by the general public, utilizing distributed ledger technologies – such as blockchain – to introduce greater transparency into supply chain operations.
Identify your vulnerabilities
Determining potential areas of weakness is crucial for organizations seeking to safeguard their operations, and this often necessitates extensive investigation. It involves a thorough examination extending beyond immediate suppliers to encompass the entire supply network, including distribution centers and transit points. This process can be both lengthy and financially demanding, which is why many large companies concentrate their efforts on key, direct suppliers representing the majority of their spending.
However, an unexpected interruption that suspends business operations can ultimately prove far more expensive than a comprehensive assessment of the supply chain.
The purpose of this assessment should be to classify suppliers based on their level of risk – low, medium, or high – and then develop suitable plans to lessen potential impacts. This is achievable only with access to information provided by suppliers across all levels of the supply chain, and with confidence in the accuracy of that information for analytical purposes.
The objective is to receive advance notice of potential delays or disruptions, enabling businesses to either broaden their supplier base or accumulate reserves of essential materials and products. It’s important to note that this is largely based on projections, considering the rapid development and distribution of a vaccine following recent shortages of everyday goods.
Pandemic and the vaccine and supply chains
The concept of a truly global and open market faced significant challenges this year. Pharmaceutical firms encountered difficulties in obtaining essential components, including key ingredients for common medications like pain relievers manufactured in India. A competitive dynamic arose, with nations prioritizing the acquisition of necessary resources for their own populations – a situation further fueled by growing nationalistic sentiments and trade protectionism. The importance of overseeing and understanding supply chains became clear, and this extended beyond the private sector to become a focus for governments as well.
As vaccines are distributed (and multiple vaccines are being utilized), the challenges previously mentioned regarding risk, sourcing control, and process management will continue, alongside concerns about product quality and accountability. From counterfeit products to targeted cyberattacks exploiting vulnerabilities in the distribution process – specifically, the temperature-sensitive nature of vaccine transport – there is a growing demand for decentralized logistics systems that can track every stage of production. However, these advancements will be ineffective if governments are unable to effectively manage their own supply chain requirements, as current events demonstrate.
The COVID-19 pandemic may lead to valuable insights and adjustments. Now is the time for businesses and entire sectors to re-evaluate and overhaul their global supply chain strategies, working in partnership with governmental bodies. The pandemic has undoubtedly revealed weaknesses within many organizations, particularly those heavily reliant on international sourcing for both raw materials and completed products.
Fortunately, innovative supply chain technologies are being developed to enhance transparency throughout supply networks, mitigating risk and establishing a resilient infrastructure capable of withstanding future pandemic-related disruptions. The implementation of distributed ledger technology has already demonstrated its effectiveness in ensuring data integrity and fostering trust within the supply chain. Digital supply networks are poised to gradually supersede traditional linear models, dismantling departmental barriers to achieve comprehensive visibility, collaboration, responsiveness, and efficiency.
This represents a positive outlook for the future, particularly considering the widespread familiarity with supply chain dynamics that has emerged over the past year – from working remotely and accumulating essential goods to repeatedly attempting to purchase limited-edition gaming consoles online.