Unpredictable and unprecedented global emergencies such as COVID-19 can disrupt almost every industry around the globe, and global supply chains are no exception. The effect of a worldwide crisis like Coronavirus is enormous and is impacting economies in all corners of the world. And global supply chains are at the frontline. From raw materials to finished products, supply chains across the globe have been significantly impacted almost instantly and overnight.
COVID-19 has highlighted the urgent need for companies to prioritise the transformation of traditional supply chain models. Companies must rethink supply chains altogether and consider alternative measures such as digital sourcing technology to minimise further risk and disruption.
The state of play – Global supply chains are suffering
The global supply chain industry is hurting. And countries and industries around the world are handling the current crisis differently.
In countries like Singapore, for example, regional contingencies were identified long before the outbreak, due to local disruptions of supply lines by occurrences such as the Southeast Asian haze. Singapore’s Minister for Trade and Industry, Chan Chun Sing, commented that the ongoing pandemic required the review of supply quantities and the need to continuously diversify supply chains, to keep abreast of supply lines. This has served Singapore well during the current crisis.
In other parts of the world, there hasn’t been the same extent of forward-thinking on supply chains during emergencies resulting in even more disruption. For example, Australia’s biggest supermarket began rationing toilet paper after police were alerted in Sydney to a knife scuffle over the scarce commodity. Social media photos from the US also show toilet paper shelves lying empty due to panic hoarding.
In terms of sectors, the global aviation industry is one of the sectors most ravaged by the coronavirus epidemic. Over the past few years, airlines have seen an increase in cargo traffic mainly driven by e-commerce. With the spreading nature of the virus, air passenger travel has dropped off sharply with airlines resorting to flying freight as an alternative business opportunity.
The bottom line for leaders: set up a new set of suppliers to open a new supply line. And to ensure adequate supplies, leaders must continuously adapt their supply chain strategies.
Digital technology is part of the solution
Multi-sourcing supplies, in the long run, help you to de-risk your supply chain strategy in the event key suppliers are unable to rise to the occasion. At Proudfoot, we can anticipate supply chain issues by investing in intricate planning and technology solutions. Firms must be more agile within production and distribution networks to reconfigure and maintain supply as quickly as possible.
If you look at China, when the virus broke out in the city of Wuhan, it rattled global supply chains. Hundreds of international firms have direct suppliers within the impacted areas around Wuhan, and this has affected logistics within China, and subsequently, the rest of the world. It became clear – companies must implement supply chain risk management and business continuity strategies as a priority.
Luckily, new supply chain technologies that can improve supply chain agility and business resiliency are emerging rapidly. Technologies such as IoT, cloud computing, 5G, AI, 3D printing, and robotics are preparing supply chain networks for the digital evolution of the future. Volatile business landscapes due to disruptive events such as COVID-19, trade wars, wars and terrorism force companies to expect the unexpected.
These new technologies are crucial to risk management and business continuity which are integral to overall business strategy. We must build a resilient supply chain that manages risks and speedily adjusts and recovers from unforeseen supply chain disruptions that occur.
Three things leaders need to do to diversify supply chains promptly:
- Select the right technology solution to reduce cost savings and time
- Scour different geographic regions without limiting suppliers to one location
- Leverage business networks to assess new suppliers
Case study: Transformative technology – harnessing the power of Artificial Intelligence (AI) to discover and evaluate thousands of new suppliers in a fraction of the standard time
A leading German automotive supplier had to re-assess their entire operation at a critical plant facing declining production volume and growing competition. Proudfoot provided untapped solutions in operational effectiveness with significant cost savings in the procurement of direct production material.
To accelerate procurement savings, Proudfoot implemented a new and innovative digital global sourcing approach leveraging both artificial intelligence and big data. This project tapped into millions of data points collected from hundreds of data sources across the world to generate the initial long list of potential suppliers.
Through a primarily automated process, analysis of promising candidates’ responses narrowed the field down to smaller groups. The leading-edge sourcing technology provided the automotive supplier with the capability to rapidly evaluate more suppliers with only a fraction of the effort usually required. Category managers now have more time to spend on other high-value tasks rather than strategic sourcing initiatives.
Proudfoot supported new tools, developed processes and behaviours, enabling companies to focus time on value-adding activities rather than administrative work. Within just a few weeks, we found 20 formerly unknown qualified suppliers who fulfil the requirements for automotive certification, production processes, and quality specification. These included suppliers across many countries in Europe and Eastern Europe, as well as best-cost countries in the Middle East and Asia.
We saw significant cost savings in manufacturing, raw materials, overheads, generalised costs and margins with purchase price reductions in all logistics costs. Introducing new suppliers in the chain expanded the existing supplier base to achieve significant cost reductions, securing the margins of the plant.
Authored by: Greg Smith, Managing Director, Americas, Proudfoot
Greg is a Digital Supply Chain Transformation specialist, with more than 30 years’ experience serving clients from Consumer Packaged Goods, Retail, Pharmaceutical, Health Care, Life Sciences, Wholesale and Manufacturing & Transportation verticals.
As MD of Supply Chain at Proudfoot, Greg is responsible for advising businesses on how they can optimise their operations through process improvement, digital implementation and integration, cost reduction, business alignment, performance measurement and growth innovation. Greg began his career in consulting, before moving client-side and holding several senior business development roles at large technology companies, including IBM, Inovis and Cognizant. He then moved into specialist supply chain consulting, helping a range of clients optimise their supply chain operations.
Greg is a published author, an in-demand speaker, and producer of thought leadership with established expertise in building complex global consulting practices that deliver. Greg holds a BBA in Finance from the University of Massachusetts Boston. He is a member of the Society of Industry Experts Supply Chain.
Contact Proudfoot at +1 470-548-6489 or firstname.lastname@example.org to learn more about our digital sourcing tools and to request a Procurement Impact Analysis.