By Professor Richard Wilding OBE, Professor of Supply Chain Strategy
“In the new normal, if your supply chain is the same as the one that you had pre-coronavirus, you’re probably doing something wrong.” – Professor Richard Wilding OBE, Professor of Supply Chain Strategy at 星空体育官网 School of Management.
From stalls in supply and transportation capabilities, to empty supermarket shelves – the Covid-19 outbreak has exposed vulnerabilities and weak spots in our supply chains, and highlighted the need to change and adapt in order to meet the requirements of an ever-changing ‘new normal’.
The outbreak has brought into sharp relief the impact that overdependence on one location or a lack of visibility over the entire supply chain can have – for example the discovery early into the pandemic that key active ingredients for important pharmaceutical products were manufactured in China, where factories were under lockdown– as well as the impact that customer trust, and therefore customer behaviour, can have on demand and ability to maintain a steady supply of goods.
Every single part of the supply chain is potentially vulnerable to disruption – whether that’s social distancing regulations impacting manufacturing capability, border closures altering the amount of time it takes to transport goods, or sudden and unprecedented spikes in demand from consumers which create a bullwhip effect. Each element of the supply chain is all part of a whole and if one falters the whole thing can be impacted. What this crisis has made clear is that going forward supply chains must have an increased level of resilience built in, so that businesses can ensure they are robust and responsive in the face of challenges.
In a white paper published by DHL, , co-authored by Dr Klaus Dohrmann and Dr Malcolm Wheatley, Professor Richard Wilding highlights a fundamental change to supply chain strategy – in which resilience may be favoured over cost-efficiency, and outlines the key actions businesses should consider taking.
A shift from procurement for cost to procurement for resilience
According to Professor Wilding, “we are moving from an era marked by an emphasis on procurement for cost, to an era marked by an emphasis on procurement for resilience”, and while this may lead to an increase in costs for businesses – many will decide it’s worthwhile to have the peace of mind that they can continue to be operational and provide for their customers in the face of future challenges.
Going forward, businesses can expect increased pressures (both regulatory and on a society-wide level) to ensure they are more resilient to disruption and that stocks of critical products are maintained. Alongside stitching resilience into the fabric of their supply chains, building trust with their customers through transparency may also play a key role in avoiding further panic-buying behaviour that fuels volatility – further helping to stabilise supply chains.
Previously, organisations focused their resiliency planning around securing first-tier suppliers. Now, they might extend their resiliency planning further upstream to second and third-tier suppliers when making decisions around sourcing, inventory buffers and transportation routes. There is a strategic element to resilience, that shouldn’t be overlooked.
Location and visibility: supply chain diversification
“In these volatile times, supply chain visibility and control have never been more important.” – Alexander Gunde, President DHL Technology Sector.
Even prior to the disruption of Covid-19, events such as natural dis