The COVID-19 pandemic may be far from over, but recovery efforts in many corners of the globe have already begun in earnest.
We now see instances of factories, transportation lines, and in some cases whole economies embarking upon the slow and uncertain process of reopening. Unfortunately, the degree to which these tentative steps to restart supply chains will be successful still very much remains to be seen.
There’s no disputing the fact that a “return to normality” — if such a thing is even possible — will require the mending and rehabilitation of the international supply chains that power so much of our globalized economy. However, to accomplish that, supply-chain leaders must first figure out how to answer some exceedingly difficult and complicated questions. For example, what does reopening mean for procurement teams that have been left unable to reach their typical suppliers?
It’s certainly the case that increasing numbers of supply-chain teams have turned to digital to adapt rapidly to the challenges posed by COVID-19. Some organizations have managed to tackle two or three years’ worth of digitization efforts in a matter of months. How can supply-chain teams leverage their access to these new technologies in the short term, to hedge against long-term challenges that will surely emerge as a consequence of the pandemic?
Procurement Challenges Ahead
It’s important to understand the key challenges that supply-chain management and procurement teams will face during the months to come. For better or worse, restoring global supply lines will not be a matter of simply picking up from where we left off. The effects of COVID-19 have been not only far reaching and devastating, but also profoundly complex — meaning that there are no simple fixes.
As procurement teams work to navigate the industry’s tentative reopening, they can expect to face three overarching challenges. The first is that, regardless of industry, these teams will almost certainly return to find a dramatically reshaped supplier landscape. A recent briefing published by Bain & Company points out that many suppliers may have gone out of business as a result of the ongoing economic downturn, while others may be operating in geographic regions where lockdown orders still remain in effect. Businesses will need to diversify their supply chains at a time when options will be extremely limited, and also determine how to identify which of their remaining suppliers are most at risk.
Another important challenge to consider is the simple fact that the COVID-19 pandemic has not ended, and likely will not end until a vaccine is successfully developed and distributed across every continent. Although recent weeks have brought some good news on that front, it could still take months or even years to bring a vaccine to market. To protect their supply chains, procurement teams will need to find a way to either start reacting to supply chain disruptions faster than ever before, or proactively select suppliers less likely to be affected by the virus’s future spread — in effect, predict the future.
The final and most daunting challenge that procurement teams must prepare for is the stress that will be placed on their supply chains as a result of the inevitable economic rebound. Barring a completely unexpected turn of events, economies will almost certainly begin getting themselves back up to speed by Q4 2020 or Q1 2021. Supply chains, however, don’t move quite so quickly, and companies will find that supply is quickly outpaced by growing demand. This will drive prices much higher among suppliers, turning markets into a virtual shark tank where companies who are unprepared for this shift could be quickly gobbled up by competitors.
Will Digitization Help?
There’s no denying that the COVID-19 pandemic has come with many challenges, but it also presents its fair share of silver linings. For example, the coronavirus has brought well-deserved recognition for essential workers at every level, from overworked physicians to underpaid grocery store clerks. Global lockdown orders have had unexpected, positive benefits for the environment. And most notably for the purposes of this article, the virus has forced the more rapid adoption of underutilized technologies such as video conferencing and artificial intelligence.
Before the coronavirus entered the picture, fewer than half of large global enterprises had adopted tools like AI, advanced analytics, and the internet of things in their supply-chain management. It’s too early to tell how the pandemic has impacted that number, but anecdotal reports indicate that it could very well accelerate the rate of digital transformation within supply chains. Digitization brings many benefits to procurement teams — AI and machine learning can play a substantial role in fast-tracking supplier discovery and onboarding, and enhance both supplier relationships and strategic diversification.
AI-powered “information advantage" not only enables speed but also delivers visibility on new innovative materials and products from new suppliers that would previously go under the radar. Entire industries can become far more innovative with better access to product knowledge. It will become increasingly valuable for organizations to have a holistic view of all supplier data, by using a digital platform to benchmark new and existing suppliers, enabling them to make collective decisions and improve their entire supply chains.
The organizations that will thrive beyond the current crisis will accelerate their learning now, and use the time wisely to communicate with new secondary suppliers, tackle onboarding processes, and brainstorm solutions to future bottlenecks. It’s quite likely that the coming months will reshape entire industries. The companies that succeed will move quickly, strategically, and decisively to take advantage of the opportunities to come, and digitization will be an essential part of that work.
Gregor Stühler is co-founder of Scoutbee.
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