COVID-19 has had a major impact on the beverage industry, seeing everything from products flying off shelves, supply chain complications and changes in consumer behavior. Optimizing production begins with ensuring employee safety. As they struggled to keep their businesses running, companies were planning significant strategic changes to the configuration and operation of their supply chains. Relationships between supply chain partners must evolve. In May 2020, much of the world was still in the grip of the first wave of the COVID-19 pandemic. Although disruptions are inevitable, we need to plan and respond differently if we're to ensure global economic resiliency in the future. Compared to a generation ago, there are fewer but much more efficient operations capable of. ), Bringing Manufacturing Back to the U.S. Is Easier Said Than Done Willy C. Shih HBR.org, April 15, 2020, Its Up to Manufacturers to Keep Their Suppliers Afloat Tom Linton and Bindiya Vakil HBR.org, April 14, 2020, Coronavirus Is a Wake-Up Call for Supply Chain Management Thomas Y. Choi, Dale Rogers, and Bindiya Vakil HBR.org, March 27, 2020, Coronavirus Is Proving We Need More Resilient Supply Chains Tom Linton and Bindiya Vakil HBR.org, March 5, 2020, The 3-D Printing Playbook Richard A. DAveni HBR, JulyAugust 2018, Find the Weak Link in Your Supply Chain David Simchi-Levi HBR.org, June 9, 2015, From Superstorms to Factory Fires: Managing Unpredictable Supply-Chain Disruptions David Simchi-Levi, William Schmidt, and Yehua Wei HBR, JanuaryFebruary 2014, Innovation Killers: How Financial Tools Destroy Your Capacity to Do New Things Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih HBR, January 2008, Does America Really Need Manufacturing? Gary P. Pisano and Willy C. Shih HBR, March 2012, Restoring American Competitiveness Gary P. Pisano and Willy C. Shih HBR, JulyAugust 2009. How coronavirus will affect the global supply chain. Businesses have a habit of projecting optimism; now they will need a strong dose of realism so that they can free up cash. Where possible, a digital, end-to-end S&OP platform can better match production and supply-chain planning with the expected demand in a variety of circumstances. What is the World Economic Forum doing to help the manufacturing industry rebound from COVID-19? This is how to distribute a coronavirus vaccine to everyone. In the current landscape, we see that a complete short-term response means tackling six sets of issues that require quick action across the end-to-end supply chain (Exhibit 1). Start by mapping the full extent of your supply network to identify both direct and indirect sources. . Yet many things are not going to change. This pandemic has had a major impact on the exchange of goods throughout the world. .chakra .wef-10kdnp0{margin-top:16px;margin-bottom:16px;line-height:1.388;}What is the World Economic Forum doing to help the manufacturing industry rebound from COVID-19? Shifting production from China to Southeast Asian countries will necessitate different logistics strategies as well. Danko Turcic is an associate professor of operations and supply chain management. Chemicals and commodity players made the smallest overall changes to their supply-chain footprints during the past year. The COVID-19 pandemic has created global health and economic disruption. Reduction in the number of SKUs (stock keeping units) that many retailers offer. And revisit your product strategies: Offering consumers more choices isnt always better. As the crisis takes its course, constrained supply chains, slow sales, and reduced margins will combine to add even more pressure on earnings and liquidity. The supply chain has become a main protagonist everywhere, it has moved from playing a "behind the scenes" organizational role . The COVID-19 pandemic has caused considerable damage to various industries worldwide. Last week, the Biden-Harris Administration released the conclusions of its 100-day review of supply chains for four critical products: semiconductor manufacturing and advanced packaging; large capacity batteries, like those for electric vehicles; critical minerals and materials; and pharmaceuticals and active pharmaceutical ingredients. Of course, safety stock, like any inventory, carries with it the risk of obsolescence and also ties up cash. During the pandemic, when demand surged in many product categories, manufacturers struggled to shift from supplying one market segment to supplying another, or from making one kind of product to making another. Are there some long-term impacts we should be concerned with? Yet supply cannot rise overnight to satisfy demand. With these factors in mind, forecasting demand requires a strict process to navigate uncertain and ever-evolving conditions successfully. To make their supply chains more manageable, many retailers have been reducing product variety. If that supplier produces the item in only one plant or one country, your disruption risks are even higher. What is a supply chain and what kinds of disruptions in the global supply chain has the COVID-19 pandemic caused? A weekly update of the most important issues driving the global agenda. But will it last? The public sector can play a valuable role in reducing these costs by facilitating short-term adjustments and by addressing vulnerabilities in U.S. supply chains. Nevertheless, despite the prevalence and impact of supply-chain shocks over the past two years, only 39 percent of companies are investing in tools to monitor risks and disruptions (Exhibit 5). Companies will need all available internal forecasting capabilities to stress test their capital requirements on weekly and monthly bases. Almost 90 percent of respondents told us that they expect to pursue some degree of regionalization during the next three years, and 100 percent of respondents from both the healthcare and the engineering, construction, and infrastructure sectors said the approach was relevant to their sector. What particular impacts are we seeing now due to the coronavirus? [2] Core inflation is a measure that removes from the price index those products, like food and energy, whose prices are usually volatile. Compared with organizations that reported problems, successful companies were 2.5 times more likely to report they had preexisting advanced-analytics capabilities. 1. To prepare for such instances effectively, organizations should take the following actions: With many end customers engaging in shortage buying to ensure that they can claim a higher fraction of whatever is in short supply, businesses can reasonably question whether the demand signals they are receiving from their immediate customers, both short and medium term, are realistic and reflect underlying uncertainties in the forecast. In the past, many industries have been surprised by strong demand and caught with too little inventory of specific goods. This can be supplemented with the described outside-in analysis, using various data sources, to identify possible tier-two and onward suppliers in affected regions. They cant and shouldnt totally back away from globalization; doing so will leave a void that otherscompanies that dont abandon globalizationwill gladly and quickly fill. With so much interest in advanced analytics, it comes as little surprise that the crisis has been a catalyst for further digitization of end-to-end supply-chain processes. While consumers are returning to restaurants in droves, supply chain issues in the restaurant industry continue in the wake of the Covid-19 health pandemic. The distributed global business model, optimized for minimum cost, is finished. The biggest shifts occurred in industries that were the lowest users of these approaches before the pandemic. If you cannot relieve people in their situation, where they have to physically work in close proximity and the disease starts spreading, you might have people not showing up for work or actually physically falling ill. In our homes, there are semiconductors in air conditioning temperature sensors, rice cookers, refrigerators, LED lighting systems and, of course, in all of our digital devices from phones to laptops. A weekly update of the most important issues driving the global agenda. More than any of these past events, the Covid-19 pandemic exposed the degree to which our global supply chains are fragile and lethargic in their ability to respond to unexpected changes in demand. In many sectors, there are signs that the rate of investment in digital supply-chain technologies is slowing down. And who can forget the Ever Given saga, in which a mammoth cargo ship blocked the Suez Canal, stranding 400 vessels and holding $9 billion in global trade hostage each day? Vulnerability must be an everyday, not a 100-year, planning event consideration. How are companies responding to the coronavirus crisis? COVID-19 How COVID-19 Affects Farmers and the Food Supply Chain COVID-19 has highlighted weaknesses and inequities in America's food supply system, as well as the need to fix them by Monica Jimenez April 27, 2020 Tags: COVID-19 , Friedman School of Nutrition Science and Policy In a standard supply chain, raw materials are sent to factories where goods are manufactured. Abstract. But were any lessons learned and new practices put into play? And few appear to have converted factories from scratchier commercial toilet paper to retail varieties, unlike the rapid retoolings that allowed U.S. manufacturers to ramp up production of cleaning wipes and hand sanitizer. One of the most visible impacts of the coronavirus pandemic has been the strain on the global supply chain, with consumers noticing certain goods are harder to find at their local store. The next step is to conduct scenario planning to project the financial and operational implications of a prolonged shutdown, assessing impact based on available capacity (including inventory already in the system). How companies can accelerate and galvanize food system transformation, John Blasberg, Jenny Davis-Peccoud, Sasha Duchnowski and Vikki Tam, Global chip shortages: Why suppliesmust be prioritized for healthcare capabilities, Chief Executive Officer and Vice-Chairman of the Board, is affecting economies, industries and global issues, with our crowdsourced digital platform to deliver impact at scale. Once the immediate risks to a supply chain have been identified, leaders must then design a resilient supply chain for the future. While no comparable survey data exist from before the pandemic, industry-specific surveys on input shortages suggest these levels are much higher than usual. Using monthly production data, monthly export and import data, Japan's input . But you are left vulnerable when you depend on a single supplier somewhere deep in your network for a crucial component or material. It is impossible to answer this question generally. Estimating all inventory along the value chain aids capacity planning during a ramp-up period. Opinions expressed are those of the author. Businesses are also experiencing a greater need in areas such as data centers, renewable energy systems and the increasingly automated processes of Industry 4.0 factories and warehouses. RT @RwandaFinance: On VAT exemption on maize flour and rice, Minister @richard_tusabe explained that the move was informed by the high cost of living and doing business brought about by COVID-19 impact as well as supply chain issues, all of which affect Rwandans. We need to transform the pain of that experience into new ways. This is because as part of the change, you can unfreeze your organizational routines and revisit design assumptions underpinning the original process. Several years ago I spent a week at a new Chinese factory of a major American industrial-equipment company. A well-designed supply chain is built to withstand some supply uncertainty and some demand fluctuations. 900 University Ave. Supply chain resilience depends both on the product and on the retailer that engineered that particular chain. Ensure dynamic monitoring of forecasts in order to react quickly to inaccuracies. We find that supply-chain losses that are related to initial COVID-19 lockdowns are largely dependent on the number of countries imposing restrictions and that losses are more sensitive to. Explore production-process improvements or new technologiessuch as automation, continuous-flow manufacturing, and 3D printingthat could lower your costs or increase your flexibility when faced with a shock. They applied the broadest range of measures, with 60 percent of healthcare respondents saying they had regionalized their supply chains and 33 percent having moved production closer to end markets. While automotive and commodity players were reluctant to commit to additional investments amid the uncertainty of early 2020, for example, 100 percent of the respondents in those sectors eventually did so (Exhibit 4). Once youve identified the risks in your supply chain, you can use that information to address them by either diversifying your sources or stockpiling key materials or items. The authors wish to thank Viktor Bengtsson, Chris Chung, Curt Mueller, Hilary Nguyen, Ed Paranjpe, Anna Strigel, and Faaez Zafar for their contributions to this article. The pandemic underscored the imperative of manufacturers and supply chain partners to do more than plan for infrequent and 100-year events. Cross-industry comparisons reveal that service firms experienced more loss than manufacturing firms. Natural disasters you can plan for, like hurricanes. Many consumers are making large purchases with savings accumulated during the pandemic, sending new home sales to their highest level in 14 years and auto sales to their highest level in 15 years. Collaborating with partners can be an effective strategy to gain priority and increase capacity on more favorable terms. A further 59 percent of companies say they have adopted new supply-chain risk management-practices over the past 12 months. We are accelerating blockchain technology across supply chains, Helping companies avoid disruptions to global supply chains. The pandemic pushed risk to the top of virtually every corporate agenda. Others may slip back, reverting to old ways of working that leave them struggling to compete with their more agile competitors on cost or service, and still vulnerable to shocks and disruptions. Companies need to make their networks more resilient. The goal of the mapping process should be to categorize suppliers as low-, medium-, or high-risk. That matters because many of todays most pressing supply shortages, such as semiconductors, happen in these deeper supply-chain tiers (Exhibit 2). Managers should consider a regional strategy of producing a substantial proportion of key goods within the region where they are consumed. COVID-19 has imposed shocks on all segments of food supply chains, simultaneously affecting farm production, food processing, transport and logistics, and final demand. In practice, companies were much more likely than expected to increase inventories, and much less likely either to diversify supply bases (with raw-material supply being a notable exception) or to implement nearshoring or regionalization strategies (Exhibit 1).
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