Could COVID-19 be the black swan event that finally forces many companies, and entire industries, to rethink and transform their global supply chain model? One fact is beyond doubt: It has already exposed the vulnerabilities of many organisations, especially those who have a high dependence on China to fulfil their need for raw materials or finished products. A decades-long focus on supply chain optimisation to minimise costs, reduce inventories, and drive up asset utilisation has removed buffers and flexibility to absorb disruptions and COVID-19 illustrates that many companies are not fully aware of the vulnerability of their supply chain relationships to global shocks.

Fortunately, new supply chain technologies are emerging that dramatically improve visibility across the end-to-end supply chain, and support companies’ ability to resist such shocks. The traditional linear supply chain model is transforming into digital supply networks (DSNs), where functional silos are broken down and organisations become connected to their complete supply network to enable end-to-end visibility, collaboration, agility, and optimisation.

I teach supply chain to nearly four hundred graduating Masters in Business Administration students every year and I have always emphasised to the business students about the vulnerabilities of a supply chain network to external threats and also mention that statistical forecasting can be faulty and create unrealistic understanding of consumer demand patterns. This has become fairly obvious now that the COVID19 crisis has caused disruptions across global supply chains; something which is an important factor to be taken into account for businesses to understand now and in the future.

Organisations which have tried to improve supply chain resiliency and bring down disruption risk have started to make progress in adopting an idea called postponement whereby the products are only produced when there is actual demand for them. This mitigates supply chains from storing up too much inventory and incurring unnecessary costs. The past is not a good indicator of the future because the way technology is now being used where prices can be easily compared and contrasted at the click of a button and can allow for consumers to adjust buying accordingly has created a vacuum for forecasting.

Transparency between companies and customers about supply chains is crucial for recovery after the coronavirus crisis subsides, as well as for the prevention of future disruptions. Information flow or data has always been a challenge across the supply chain and post COVID-19 exchange of data among retailers, warehouses, distributors and manufacturers would be crucial because that’s where you’ll figure out where there are some challenges, and where the opportunities lie.

During the coronavirus crisis, it’s important to be able to use live data to make quick adjustments in supply chains. Every day is a challenge, you don’t know what’s going to happen as a supply line is shut down, or you are missing products, for example. There needs to be a move towards more agile planning and a greater emphasis on risk resiliency and robust supply chain as critical to a firm’s success.

The impact of China’s lockdown will diversify supply chains in the future, instead of relying only on China manufacturing hubs such as Vietnam, Mexico, and India are likely to benefit from that shift.

We will also see a decentralisation of manufacturing capacity, with companies looking to bring production home. This trend grew with the likes of automation and small batch production, which had become so cheap that a number of countries started moving portions of their supply chain back home. Policymakers may be increasingly pressured to consider whether certain products need to be manufactured in the country or the region. The transition to a new model for supply chains will be underpinned by a rapid and wholesale digitisation of the paperwork that accompanies global trade. The current crisis is an opportunity to reset a system that has relied on outdated processes. Creating smart and agile supply chains is the key to building a global trade and investment network that’s capable of weathering future storms.

A renowned professor of Supply Chain Hau Lee wrote about how to do this. He followed what is known as the three A’s that are:

Agility – it is about how quickly a company can respond to any change in its business environment. It refers to short-term changes.

Adaptability – it is the capability of a company to adapt to business changes that are more permanent in nature and therefore, it is strategic and has a long lead time.

Alignment – it is the ability to have common and shared interests across the supply chain including vendors and customers.

Hau Lee argues that all three can be done whereby “Alignment” is the toughest of the three objectives. An original equipment manufacturer tries to consolidate, for example, common raw material requirements across an extended supply chain – for all the rhetoric about “partnership,” the old axiom “every ship needs a captain” still rings true. For alignment to work, the OEM’s ultimately needs to establish the rules of engagement and needs a way to monitor and enforce compliance with those rules. Generally speaking, rules will be followed only when they are enforced. To apply yet another metaphor, the OEM must assume the role of the conductor in an orchestra. Using the example of material-input consolidation, an OEMs outside vendors, distributors and mills constitute the various sections of the orchestra. The ability of the orchestra to produce beautiful music depends to a large extent on the conductor’s musical score (are the rules of engagement “win-win” or zero-sum-game) and the interaction of the various sections of the band. Get either of those two things wrong and the music sounds cacophonic.

A way forward for all supply chains amidst COVID-19 is to answer the following questions:

What country does my company do business in with suppliers at the tier one, two and three levels? Which suppliers are affected by COVID-19, and what should I do about it? Will they be financially threatened because of COVID-19? Do I have supply risks in critical categories because of COVID-19? Is there anything I can do if suppliers are individually high risk? What transportation lanes are impacted? Where is my cargo/container today? Can delays or other risk factors be expected further down the inbound supply chain before it reaches my facilities? How will I be able to build easier and faster flows of information into my supply chains?

Investment in technology will be equally important. Just-in-time delivery has taken a lot of heat in the coronavirus crisis for not being able to hold large inventories of vital products and being too dependent on single sources in supply chains. That lean model may be modified after this is all over, but it’s not likely going back to the time where large inventories are stockpiled.

But improving in four areas of technologies can help:

Order visibility; If purchase orders can be seen in real time, collaboration can occur and answers to problems like backlogs can be addressed quickly. The information can drive dynamic planning for receiving departments, production and inventory.

Carrier visibility; As mentioned above, logistics are vital. It’s important to know where your products are and what risks they face. Many carriers have the ability to provide electronic notifications via Electronic Data Interchanges or web services driven from GPS or ELD-based applications on the smartphones of their drivers or in their trucks. Real-time collaboration here can save travel time as well as aid online dock scheduling systems to reserve a time and door for the delivery.

Warehouse visibility; When information from suppliers and carriers is shared, collaboration helps customers improve their receiving operations and put away strategies.

Forecast visibility; This is vital to help anticipate the risks and opportunities to come. With the ability for more information in real time, planning teams will be able to share supplier capacity issues with the buying community to quickly launch sourcing events for alternate supply.