The Ever-Changing New Normal of the Supply Chain

How will the supply chain look in the new normal?
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Never in the history of mankind has the need for supply chain management been felt so much. When the entire world was under lock down, it was the onus of the supply chain function to ensure that essential commodities be made available. The profession has been tested again and again under the given constraints. Technology has been used to extensively be it drones, AI for contactless deliveries etc. COVID-19 is an unprecedented phenomenon and no amount of scenario analysis could have ensured 100% preparedness.

New normal got defined and supply chain management had to cater to the new normal. For example for fresh produce, frozen became the new normal. For FMCG, milk replaced ice-creams. The entire supply chain had to be re-imagined to make way for this. Times are difficult but very exciting for a supply chain professional.

According to a survey by World Economic Forum in 2011 (though relevant), four of the top five global supply chain vulnerabilities relate to visibility along long supply networks. The list included pandemics, natural
disasters, extreme weather, conflict, demand shocks, ICT breakdowns,
and export/import restrictions.

Regional Supply Chains

Supply Chains had become global to take the advantage of cost and expertise. But with this pandemic, the entire world stopped and the borders were closed. Countries will feel the need to be self-sufficient though there will be cross-border trade happening. In the short run, there will be localisation but in the long term, globalisation is here to stay though to a lesser extent than pre-pandemic times. There will be shifting of manufacturing and logistics locations to lesser risky areas at an increased cost.

Scenario Planning

Typically, companies do plan for the future but never before the importance of scenario planning been emphasized so much. The supply chain design will have redundancies built-in (though at a higher cost) to prevent disruptions. There will be all sorts of permutations and combinations being done to foolproof the supply chain. Risk identification, prioritisation and mitigation will be of paramount importance.

Daily Planning

Typically companies pay a lot of attention to long term and medium-term plans. This pandemic has once again proven that the beauty lies in the details. There will be more focus on Daily Planning to handle the
vagaries of the ever-changing new normal. With technology tools in place for real-time demand sensing, this is going to be the order of the day.

Business Models

There will be conscious consumption and hence business models will change to cater to this new consumer behaviour. We will see innovative essential products and even more innovative ways of delivering the goods. Paint companies have shifted to making sanitizers. Textile companies have started manufacturing masks and gloves. Restaurants
are shifting to a restaurant at home experience.

Technology

As we move towards more contact less deliveries, we will see usage of drones and cobots as these will help contain the pandemic through social distancing. There will be extensive use of analytics and artificial
intelligence. The collaboration tools will be more prominent as many people will continue working from home.

Social Unrest

As more and more people stay indoors, we will see a shortage of manpower in the human-intensive tasks. With rising unemployment, there are chances of social unrest which is likely to cause massive disruption in the supply chain. The gap between the haves and have nots have increased further
which is not a good sign for humanity.

E-commerce companies

The e-commerce companies will see unprecedented growth as the shift will be towards online shopping, digital payments and contactless delivery. And this has to be backed up by a dynamic supply chain and hence demand sensing, buffer sizing and placement of buffers will be critical. There will be an influx of consulting firms who will thrive to advise clients in a post COVID era.

Consolidation

With financial problems with the smaller players due to the lockdown, we will see consolidation in the industry for viability. The bigger logistics players will acquire the smaller ones which will result in higher bargaining power. There will be more organized labour which will dwell well for the economy.

This pandemic has revealed the weaknesses of a globalized economy and in order to respond, we need to fundamentally rethink supply chains. As a human race, in the medium term, the intent should be making supply chains more regional, modifying the supply chain as a key business driver and putting back humanity as the most important factor for an agile
business to succeed. It is fine if we do not make any profits now. If we survive now, we will be able to do it in the near future.


This article has been authored by Sandeep Chatterjee, Associate Director, Delloite India. All views expressed in the article are of the author’s own.

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