The latest developments in the global coronavirus pandemic give cause for concern – rising case numbers, new risk and virus mutation areas, European countries in lockdown and possible border closures.
In our discussions with customers, the only thing we can be sure of is that we will also have to contend with temporary and permanent restrictions for large parts of 2021. This has a significant impact on logistics, since the primary strategy for fighting new waves of COVID-19 infections is imposing local mobility restrictions. Many businesses are looking for an approach to master these challenges and make their supply chain more resilient.
Many restrictions that appeared in various forms at the beginning of 2020 may once again have serious consequences for supply chains, and this includes the chemical and pharmaceutical industry – procurement bottlenecks, order cancellations and distribution challenges are only a few of the effects on operations. It’s obvious how a lockdown can massively disrupt supply chains and necessitate adjustments. As this is the case with governments and administrations, we don’t see any kind of uniform picture for businesses. In most cases, individual solutions have been found for acute problems. However, some companies have used the time to work conceptually on business continuity issues for the supply chain. We have recognized two primary ways in which businesses are setting up their supply chains in response to the pandemic.
Variant 1: Firefighting within complex supply chains
In the pharmaceutical and chemical industry, many businesses have trimmed down their supply chain design through efficiency programs and optimization measures in a way that’s geared towards centralizing various tasks. Specialized, global production facilities are more vulnerable to COVID-19 restrictions. Long supply chains and product shelf lives often limit the rapidity of responses to quickly changing limitations. The order situation also suffers from uncertainty on the part of customers, which makes planning even more difficult. The effect of this became apparent in the second and third quarters – firefighting. It’s rarely possible to make short-term adjustments to the supply chain. There are operational problems to be solved, and there is hardly any time for planning with foresight. The result is rising costs and declining service levels, and it becomes impossible to compensate for these things even with increased personnel resources.
Variant 2: Strategic planning development
There are also some businesses that worked during Germany’s first lockdown phase to test their current supply chain design and scrutinize certain areas. Decreasing demand made it possible to redesign human and financial resource capacities and increase efficiency. Operational processing, planning and strategic development were carried out on an ongoing basis so that emerging risk aspects could be immediately taken into account. Even before the new ISO 22301: 2019 guideline, many businesses were increasingly focusing on ways to carry out ongoing developments for operational processes with a view toward achieving their strategic goals on a step-by-step basis. In more and more logistics and supply chain units, additional teams are being established to deal with supply chain design, typically with a regional focus.
Trend: supply chain resilience
A comparison of the two approaches shows that the second group is able to respond more successfully over a long-term period. Overall, performance can be improved with fewer supply chain fluctuations. Successful businesses recognized this trend early on and gave it the name “Supply Chain Resilience.” The first implementations were already taking place in 2018 and throughout 2019.
The COVID-19 pandemic and the still uncertain outlook for 2021 have shown that there is now no way around this trend.
In the “old normal,” historical data was used to optimize supply chain design, perform analyses and provide the highest possible degree of reliability in statements about current challenges. However, the only certainty is that the future will not be like the past.
The new approach generates a rough picture of the supply chain and identifies improvements that take into account many variants of possible developments and disturbances in order to produce the best possible overall picture. This is also stipulated in the new ISO 22301: 2019 requirements, which include processes for business continuity management. Possible disturbances in the supply chain are consciously integrated into the design, which increases the visibility of the cost effects and environmental impact, such as the carbon footprint.
CAMELOT has extensive experience in supply chain network design and supports you in optimizing your supply chain.
We would like to thank Dominik Hartung for his valuable contribution to this article.
