COVID-19 wasn’t the first public health crisis of the 21st century to come out of Asia Pacific – that would be SARS. But it was the first pandemic to shut down central China after that region had become one of the world’s premier manufacturing hubs. Add to that, over the intervening years, much supply chain resilience had been sacrificed to just-in-time manufacturing. How, then, to regain supply chain resilience in this era of heightened public health crises?
Let’s start with supply chain visibility. Having visibility over supply chains helps ensure supply chain resilience. However, surveys from the years just before the COVID-19 crisis found that a mere six percent of companies had complete visibility over their supply chains. Not just that, seven in ten organisations lamented that their supply chains were either very or extremely complex.
It wasn’t too surprising, then, that those brittle supply chains broke. And broke quickly. Early on in the COVID-19 crisis, nearly three-quarters of surveyed companies experienced supply chain disruptions. Fortune even reported that a staggering 94 percent of its Fortune 1000 companies recorded supply chain disruptions.
What’s the solution, then, to lowering risk to ensure sufficient supply chain resilience to absorb shocks? Having a plan, for starters.
According to BCI, a shade over a quarter of companies (28.5 percent) actually had pandemic scenario plans that covered supply chain risk. That’s simply not going to cut it.
The planning process itself helps bring much-needed visibility to what are clearly overly opaque supply chains. How, exactly? Well, part of planning is doing due diligence on your entire supply chain. That means determining supplier locations, collecting, sharing, and mutually updating business continuity plans.
Too often, organisations only perform that level of due diligence on the first tier of suppliers, maybe the second. But nowadays, supply chains are highly inter-connected. Your tier four supplier might be a top-tier supplier to your top-tier supplier. If it fails, what happens with your top guy?
Along those same lines, bringing top-tier suppliers into the pandemic planning process might be a good way to ensure supply chain resilience. Be part of each other’s regular risk assessments, as well, and commit to sharing updates and controls put in place once new risks have been identified.
Those steps should be part of a larger strategy of overhauling the way you communicate with suppliers. We learned that supply-related communications were spotty and inconsistent at the initial phases of the crisis, imperilling situational awareness. Those communications eventually picked up as the crisis accelerated. Now, however, we have reason to believe they are falling back down.
Instead of taking an ad hoc approach to supplier communications, institute regular catchups, especially with top-tier suppliers, as a means of ensuring supply chain resilience when shocks come. After all, one of the lessons of this crisis is that shocks come fast. There’s little in the way of time to formalise new communication forums in the midst of a crisis. It’s much easier to build on the regular forums that you have in place. What’s more, regular catchups are a good way of spotting potential threats early and adjusting, rather than waiting and reacting after it’s too late.
Finally, brittle supply chains will remain a threat to business continuity for the foreseeable future. And even if the world’s supply chains were to suddenly come back online all at once, there’s no reason to believe that another crisis, like a severe weather event, wouldn’t imperil them once again. That’s why building supply chain resilience has to be a priority from here on out. And for more tips on how to achieve that level of resilience, download our guide to managing the supply chain impacts of coronavirus.