Faced with constant disruptions and uncertainty, global business leaders are increasingly investing in building supply chain resilience. Few have even delivered promising results through digitalization.
Threats to global supply chains
Global supply chains have been caught in an unprecedented storm over the past year. On top of the widespread disruptions brought by the still-ongoing COVID-19 pandemic, the continued trade tensions among major powers, the geopolitical disputes around the world, and unexpected incidents like the days-long Suez Canal blockage in March 2021 have all strained supply chains and led to significant economic losses.
A study estimates that the cost of supply chain disruptions was up to USD 4 trillion in 2020 for US and European multinational companies.
The way forward
Hence, supply chain leaders are increasingly looking for ways to build greater resilience into their networks – not only to weather the current storm but also to navigate through the post-COVID-19 “new normal” that still looks blurry and prepare for future uncertainties.
According to a Gartner survey, 87% of supply chain professionals intend to invest in supply chain resilience within the next two years. Organizations are beginning to understand that they must have a vibrant and flexible supply chain policy, as many factors can disrupt supply chains at any time.
Build resilience by improving information sharing
Global supply chains are vulnerable largely because of their complexity. Since the onset of globalization, companies have been rapidly expanding their supply chain networks to achieve lower costs, which inevitably makes risk management increasingly challenging.
Experts have constantly been warning global companies that the lack of visibility in supply chains could compromise a company’s survivability. Today, significant gaps still exist in data sharing and communications between buyers and suppliers, as digital tools are not yet widely adopted.
The lack of instant information exchange is also a pressing issue in logistics, where the coordination between logistics service providers, importers, and exporters is not always optimal. Exchanging information on needs and availability of transport, as well as tracking and tracing information has never been more critical.
Ensure supply chain liquidity
Another significant threat to the resilience of global supply chains today is the lack of liquidity. Transactions in supply chains tend to be complicated, as they typically involve a lengthy assessment of a business’ creditworthiness.
The outbreak of the COVID-19 pandemic made companies face serious issues in liquidity and they desperately sought to build or maintain their cash reserves.
Both buyers and suppliers need more streamlined, cost-efficient options for trade and supply chain finance.
Future proof by building supply chain resilience
While some bigger business enterprises have already started digital transformation and supplier diversification to achieve more resilient supply chains, small and medium enterprises tended to be more hesitant due to a large amount of time and investment required.
Logistics service providers must embrace the concepts of flexibility and collaboration with other stakeholders in supply chains.
The new normal is here to stay
Business leaders will be mistaken if they were to believe the outbreak of the COVID-19 pandemic was a once-in-a-lifetime event that will not have a lasting impact on the functioning of business in the years to come. The need of the hour now is for organizations to focus on building efforts to improve their supply chains, truly diversify suppliers, and scale technology tools across supply chains.
Also read: The Future Of Supply Chains