There is no overstating the extraordinary impact of the coronavirus on the global supply chain. While the supply chain is normally a finely tuned machine that can absorb a fair amount of variability, the pandemic is a once-in-a-lifetime event that has introduced many new factors outside of standard probabilities that have wreaked havoc on suppliers, manufacturers, and retailers alike.
China’s closing down to combat the virus at the beginning of 2020 set into motion a disturbance into the global economy that exists today and will remain for some time to come.
The pandemic has exposed a simple reality: few companies have complete and real-time integrated visibility into their supply chain, from when a PO is released through the entire supply chain journey - e.g.., stock in factory, order in production, at port ready to export, loading onto ship, in transit, arrive at port, in-route to final destination. And even fewer companies have actionable insights from that visibility to make business-critical decisions before the competition does.
While worldwide production has slowed, this is a great opportunity to digitize and enhance decision making in your supply chain.
In this blog post, we will explore how the coronavirus has disrupted the supply chain and how businesses must digitize their supply chains to have real time, actionable insights which they can connect to every key stakeholder throughout the business and process.
It Began in China
When China shut down after the coronavirus was discovered in Wuhan, the cascading effect rippled through the entire supply chain and economy. China is a major supplier of raw materials, which it could not supply to producers when it was dealing with the worst of the crisis. The knock-on effect was that many goods were never created, which has caused shortages across the globe. Companies with real-time visibility during this time could have contracted other raw goods providers outside of China to minimize disruptions.
Organizations with real-time visibility would know immediately that their product was never produced and/or shipped, enabling them to source materials from elsewhere. The competition without these insights would instead find this out at the last mile, much too late to orchestrate alternative solutions.
Real-time visibility also tracks the unloading capacity at port, which, if strained, could be a source of delays.Now China is open, but the rest of the globe is effectively closed for business, except for essential goods. Due to the passage of time, many Chinese manufacturers don’t have a market for their seasonal products. Orders will be canceled for products set to arrive or they will go straight into markdown when the shops reopen. With visibility into the supply chain, informed companies could have reacted in time, reduced orders, and found alternate suppliers.
A Knock-on Effect Due to Seasonality
Since many goods are seasonal, the disruption to the current supply cycle will have a knock-on effect on future seasons. The merchandise on the water is now “out of season,” so vessels that have departed are merely transporting products no one wants or is not in a position to purchase. Factories that are producing “in-season” products for export are scheduled to ship to countries now in lockdown.
The knock-on impact on factory, air, and ocean transportation has put a strain on ports and distribution centers. Specific products are not being shipped and those already in transit are being left at ports that are struggling to staff appropriately to handle the goods arriving. Using predictive analytics to know which ports and DCs are under the least amount of strain can ensure a more steady flow of goods and supplies for companies that have these real-time insights.
Change in Consumer Habits
Many changes in behaviors have exposed underreported truths about our supply chain. An example of this complexity can be found in a recent Marker article that explains why grocery stores have seemingly run out of toilet paper.
The toilet paper shortage is less about consumer hoarding as was the conventional wisdom. Instead, suppliers and the distribution chain are very different for commercial and personal use of toilet products, and with the migration from packed offices to unexpected work-from-home clusters, it will take time to reorganize the flow of supplies from corporate distributors to consumer-focused stores.
The supply chain is set up for a specific global way of living that has changed overnight. Right now, many companies are playing catch up with no time to build up stock or surplus products.
Understanding how spending patterns are changing due to panic buying, a remaking of the workforce, and an increased focus on essential goods is crucial for companies to stay ahead of the curve and to minimize the production of unneeded or unwanted products.
Return to Normalcy
When recovery begins, there will be a crush on demand for raw materials, factories, and distributors. An end-to-end visibility platform can better predict when recovery begins in earnest and enables companies to contract the right providers earlier than the competition.
The Coronavirus pandemic has exposed organizations to blind spots in the supply chain. With a visibility platform, retailers, for example, can know acutely that their product may actually be sitting in containers at the port instead of only knowing that they have unprecedented levels of stock-outs in their stores.
Receiving automated alerts and real-time ETAs will allow companies to significantly improve labor planning and thus reduce operational costs.
The power of knowing in advance when containers will be arriving at a particular port and understanding that port’s manpower allotment responsible for unloading those containers is critical to enable re-balancing of inventory to meet production or customer demand.
How to Thrive in Uncertain Times
The coronavirus has forced many companies to re-evaluate their processes, such as digitizing their supply chain and engaging in more single-country sourcing. Businesses must increase their focus on resilience, risk exposure, and business continuity plans going forward.
While the coronavirus has created massive, unavoidable problems, those problems are exacerbated when companies lack real-time visibility into what is happening across the entire supply chain and therefore fail to make better decisions based on limited information.
UST’s fully integrated and cloud-based UST Omni™ platform enables full transparency, an auditable trail, and deep-dive analytical capabilities, providing a complete and continual health check on your supply chain, sourcing origins, and vendors' performance.
We help organizations achieve real-time visibility and access predictive insights to make critical decisions more quickly than the competition.
Smart companies looking to survive the impact of the coronavirus and thrive when the crisis abates will use technologies like UST Omni™ to analyze their supply chain and orchestrate more intelligent, real-time decisions to keep a step ahead of their competition.