COVID -19, lead to Supply-Chain Disruptions & Blockages that has a Significant Economic Effect, Health, Safety and Social Impacts Globally – like Delivery Delays, Increased Costs, Shortage of Labor, Shortage of Inputs, Shut down of Operations, Health Issues of People, Job Loss, Income for Survival, Increased Inflation etc… etc…. and created a lot many uncertainties.
Supply Chain Management (SCM)
Supply Chain Management (SCM) can be defined as Management of the Supply Chains as an Integrated Process of Acquisition and Management of Flow of Supply of from point of origin to point of consumption and Delivering Further Value Added Output to the Next Level Point of Consumption (like from supplier to manufacturer to wholesaler to retailer and to final consumer) by Balancing Supply and Demand with Optimal Management of Resources with the objective of establishing relationships for Maximizing Value for Mutual Benefits on Economically, Socially and Environmentally Sustainable basis. (As defined by the Author SN Panigrahi in his Article “Value Insights into Supply Chain” Published in Aug’2010 issue of MMR – IIMM)
Supply Chain Management (SCM) involves the Flow of Goods or Services in an efficient manner. It encompasses all the steps involved in procuring raw materials through to the finished goods, in a way that is streamlined and provides value to the customer. Supply Chain Management is an integral part of most businesses and is essential to Organizational success and Customer Satisfaction – Improves the overall Planning and Efficiency of Business Operations, Boosting Customer Service; Reducing Operating Costs; Improve Financial Position; Increases Profit Leverage etc. However, when Disruption happens it Disturbs entire Chain of Activities.
Supply Chain Disruption
A Supply Chain Disruption is any Sudden Change or Crisis – be it Local or Global – that Severely Impact the Supply Chain Activities, Processes and operations. Supply chain disruption is defined as a Major Breakdowns in the Production or Distribution / Supply in a Supply Chain that Challenges your business’s ability to Plan, Source, Make, Deliver and / or Sell Products and other Transactions when an External Force Acts upon beyond the Control of the Business.
Causes of Supply Chain Disruption including events such as Pandemics, Natural Disasters, Product / Process Problems (Quality Issues, M/C Breakdown, Sudden Halting / Fall in Production due to Accidents; Unexpected Surge in Capacity etc.), Drastic Price Fluctuations, Cyber Attacks, Logistic Failures & Delays, Supplier Bottlenecks, Regulatory Issues, Geopolitical Instability (War, Civil Disturbances, Terror Attacks, Strikes etc).
Supply Chain Disruption may lead to Risks in terms of
These Factors Reflect as Decreased Productivity, Increased Costs, Non-Availability of Inputs & Raw Materials, Delayed Deliveries or Non-Deliveries, Stockouts and Loss of Revenue, as well as Loss of Customer Trust – Rising Customer Dissatisfaction; Cash Flow & Financial Problems, Closure of Businesses or Insolvency, and more and many Economic Fall outs.
Supply Chain Disruption – Types
Supply Chain Disruptions may be Classified in to Following 4 Types :
Disruption Type 1:
Demand Drop (Decreased Demand) : Examples – Airline Industry, Hotel, Tourism industry Completely come to stand still during COVID Lock Down period.
Disruption Type 2:
Demand Surges (Increased demand): Examples – Hospital, Medical & Pharma Industry, Online Food & Grocery Business, Sanitation, Shipping Industry.
As economies restart, the supply chain will be critical to supplying goods and services quickly, safely and securely. This also creates a disruption or distortion like we are facing at present in shipping & logistic crisis. This phenomenon we have seen even in advanced nations. For Example, as on 5th Nov’2021, approximately 70 ships filled with cargo were anchored outside the ports of Los Angeles and Long Beach, which are the points of entry for more than 40 percent of US imports. This backlog is a clear reminder that there aren’t enough workers or facilities to take in all the products that are being shipped to the United States right now. This type of incidences is seen all over world.
Disruption Type 3:
Reduced Productivity : as result of a Labor Shortage, Equipment Shortage, Raw Materials / Input Shortage
Example : Semiconductor Chip Shortage – The semiconductor chip shortage is now expected to cost the global automotive industry $210 billion in revenue in 2021, according to consulting firm AlixPartners. It forecasted that 7.7 million units of production will be lost in 2021.
Disruption Type 4:
Storage and Access Restrictions : Examples – social distancing requirements for employee safety, warehouse shutdowns
We have seen Many Types of Supply Chain Disasters and Disruptions in the Past. They are either confined to a Particular Region, Country or effected for a Shorter Period. However, the COVID-19 pandemic is a peculiar and unusual happening in terms of its geo-graphical scope – Spread Across the Globe; Economic Impact – effected all most all Economic Activities; Duration – become a Long-Term Crisis – No Definite end and Assessable Impact. It has long-lasting & far-reaching implications for how people work and how supply chain’s function. Even natural disasters as devastating as the earthquakes and tsunamis that struck in Indonesia in 2004 and Fukushima, Japan, in 2011 take most nations only a few months to recover from. On the other hand, COVID-19’s impact on global supply chains and economies is expected to be felt for a much longer period.
During the COVID Period All are Not Well – we have seen Stockout Situations, Lead Time Issues, Uncertain Demand & Deliveries – All the Supply Chain Targets & Measures gone awry. Govt. Regulations / Restrictions for Mobility, Lockdowns, Increased border controls and customs regulations result in longer wait times, and lack of capacity for long-haul and last-mile fulfillment etc apart from overall Economic slowdown, Short Supplies, Labor Non-availability, Health Issues and Severe Financial Crisis created extreme challenges – challenges of keeping the businesses running & keep them stable.
Pandemic’s impact on global trade is so devastating that it has exposed the Fragility of the Supply Chain and proved to be a real test of corporate Ingenuity, Resilience and Flexibility to face the Crisis. Covid-19 in India, Impacted on jobs, incomes, inequality, poverty and Loss of Human Capital. There is a pressing need for businesses to build Time Relevant Shot / Long-term Resilience in their value chains for managing future challenges.
Supply Chain Resiliency:
Supply chain resilience is about managing and adapting to the unknown across the whole spectrum of risk – Dynamics, Complexity, and Uncertainty in Supply Chains. It is “the ability of a supply chain to both resist disruptions and recover operational capability after disruptions occur.“
Supply Chain Resiliency has Three Elements :
Strategies for Improving Supply Chain Resiliency:
Map Out Your Supply Chain to get a clear understanding of which entities are most vulnerable to risk. Identify Sources of Risk – both External & Internal and Document.
Identify Critical Suppliers in Affected Areas & Assess the Risk Involved in the Entire Chain – Tier 2,3 etc – A lack of Transparency, Traceability & Accessibility relating to Second – and Third-tier Suppliers has left many firms vulnerable to shortages of critical components.
Identify Backup Suppliers – Create a Plan B, Plan C, Plan D, and so on. Diversify Supply Base and Supplier Network so that you aren’t reliant on a Single Supplier and from Single Location.
Sureshoring – the ability to source goods or services from multiple locations so as to avoid having a Single Point of Failure.
Build Buffers for Inventory and Capacity
Have End-to-End Visibility is Important to Dig Down the Details. Align IT Systems & Support to Evolve Work Requirements. Supply chain visibility is the ability to Track different goods and / or Products in Transit, in the Inventory or in the Process – giving a clear view of the Inventory, Production Scheduling, Material Movement, Customer Services, and Proactive Status Updates.
New and unexpected crises in supply Chain are inevitable. The best way to create a more flexible and resilient supply chain is by developing contingency plans and managing data through automated processes. By establishing a plan of attack and relying on reliable data, companies can thrive even when their supply chain is disrupted. Organizations are working to Transform the Supply Chain Business Model to make it more Agile and Resilient by Adapting Advanced Technology and other Strategic measures to mitigate risks by taking action to reduce an organization’s exposure to potential risks and reduce the likelihood that those risks will happen again.
Disclaimer : The views and opinions; thoughts and assumptions; analysis and conclusions expressed in this article are those of the authors and do not necessarily reflect any legal standing.
Author : SN Panigrahi, GST & Foreign Trade & Project Consultant, Practitioner, International Corporate Trainer, Mentor & Author.
Authorized Training Partner (ATP) Instructor, PMI (USA)
Author can be Reached @ [email protected]; Mobile : 9652571117