Strengthening Supply Chain Top Priority of Organizations

Strengthening Supply Chain Top Priority of Organizations

With the intervention of smart technologies into the supply chain industry, we thought we have achieved the zenith. Though we knew that sky is the limit, we kept innovating and including newer technologies to address the future challenges. However, COVID-19 broke the glass ceiling and we realized that the industry needs more disruption than we thought of. Capgemini Research Institute’s new research ‘Fast forward: Rethinking supply chain resilience for a post-COVID-19 world’ also highlights this. According to the research, over 80 percent of organizations have reported their supply chains being negatively impacted by the COVID-19 crisis, while a vast majority of companies struggle across all aspects of their operations.  

Speaking at the virtual conference organized by Synergia Foundation, Jim Rice, Deputy Director, MIT, said that compared to other disruptions, the COVID-19 is unique. He highlighted about the loss of seven core resilience capabilities – acquiring materials, transporting, capacity to communicate, convert, human resources, financial flows and distribution to customers and consumers – is more than any other disaster. He added, “There are infinite ways in which supply chains can be affected. Can organizations mitigate every source of financial, strategic, operational risks? Not really.”

Looking at how pandemic impacted the entire industry, there is a growing awareness that supply chains needs to be more flexible and agile. This will help the industry prepare for any future catastrophe we may encounter in the future. Being adaptive and reactive quickly indeed are two of the traits the industry needs. Capgemini’s report claims that 68 percent of organizations said that the current crisis has forced them to adapt their business models, while increasing supply chain resilience post COVID-19 is cited as a priority for 62 percent.

Disruptions that Await

Almost every industry is largely dependent on supply chain and its efficiencies. Hence a limping supply chain during the pandemic resulted in poor healthcare, retail and other sectors. This critical situation has forced organizations to prioritize supply chain resilience, with 66 percent of the research respondents stating their supply chain strategy will need to change significantly in order to adapt to the new normal. Only 14 percent of organizations are expecting a return to business-as-usual.

Over the past few years, every industry has witnessed major disruptions pushing companies to quickly respond to them and restore their operations to a steady, reliable state. Capgemini’s research mentions that the surveyed organizations across retail, consumer products, discrete manufacturing and life sciences reported multiple challenges across their supply chains. Most of them found challenges across all aspects of their operations, including shortages of critical parts/materials (74 percent), delayed shipments and longer lead times (74 percent), difficulties in adjusting production capacity in response to fluctuating demand (69 percent) and difficulties planning amid volatile levels of customer demand (68 percent).

From a sector perspective, only 30 percent of life sciences organizations in the survey reported a negative business impact due to the crisis, compared to over 80 percent of organizations in other sectors. But the good news is that nearly 68 percent of consumer products and retail consumers prefer locally produced items, thanks to the pandemic. On the other side, sustainability is influencing the purchase preferences of 79 percent of customers. This indeed provide an opportunity for organizations to build a more resilient, flexible and agile supply chain that is ready to withstand future disruption and global crisis.

However, not all stories are soar in the pandemic times. Nearly 55 percent or organizations have recovered from supply chain disruptions between three to six months this month, while another 13 percent expect to take six to twelve months to recover. This means some companies are prepared to take on the challenges that may come. Even diversifying the supply chain is in front of the mind for several organizations. Nearly 68 percent of businesses are investing in diversifying their supplier base and 62 percent in diversifying their manufacturing base. But the research also found that only a small proportion have the necessary levels of supply chain agility (21 percent), optimization of end-to-end costs (20 percent) and visibility (nine percent).  

The research also highlights that investment is key to building supply chain resilience. Some companies realize this and hence 57 percent of the surveyed companies are planning to increase their investment in improving supply chain resilience. Organizations are also investing in technologies that make supply chains more autonomous and intelligent. Nearly 47 percent of organizations are accelerating their investment in automation and 39 percent in robotics, with IoT, and AI also being the other two focus areas. On the other hand, companies will make strategic investments in sustainability too. As per the report, nearly 77 percent of organizations recognize the need for change with accelerating their investments in supply chain sustainability over the next three years, with logistics and manufacturing the key focus areas.

“Enterprises must rethink their supply chain strategy and determine the right level of resilience that they are prepared to build into their value chain, ensuring that this is embedded throughout research and development, planning and execution,” says Roshan Gya, Managing Director, Global Head of Operations Transformation for Capgemini Invent. “Beyond efficiency, managing resilience and sustainability will become key targets for leadership team.”