Could COVID-19 improve supply chain resilience through faster tech adoption?
29 May 2020
COVID-19 has brought the global economy to a standstill with repercussions likely to be felt for decades to come.
In particular, this pandemic has exposed the delicate foundations upon which much of global business runs. Pre-existing, and now glaringly obvious, vulnerabilities in global supply chains have left entire economies paralysed.
A staggering number of companies have been working with little understanding and flexibility of inventory and supply chains, relying on a single distant manufacturer and staffed by short-term contractors. We’ve witnessed entire production lines come to a halt, missing a key part. In short, they have ignored robustness and innovation.
As global business owners begin to emerge from lockdown, restarting production and opening offices, they must prioritise resilience to meet the challenges ahead. These will not end with this virus – as globalisation, raw material demand, technological innovation and environmental degradation collide, we’re likely to see to more disruption, more often.
We must embrace the ‘antifragile’ approach, going ‘beyond resilience and robustness’ in order to adapt, and even thrive on, disorder. The global supply chains must be built on a system which intrinsically mitigates risks and empowers countries, organisations and individuals to embrace diversified, sustainable innovation. The faster businesses re-mobilise their supply chains, the quicker the hardest-hit sectors will recover.
Building resilience with supply chain diversity
The traditional centralised manufacturing model – where an individual part is produced in an individual, distant and specialised factory, before being shipped to a central location to create the final product – has been proved archaic and inept. A business’s over-reliance on a single supplier makes them powerless against market shocks.
Previously a centralised model was the only plausible, cost-efficient choice. Today developments in connectivity, additive manufacturing, automation and robotics have made decentralised production a reality. While maintaining aspects of the existing, globalised supply, is important, the network is rapidly being supplanted.
Through on-demand, digital, decentralised manufacturing platforms, engineers and purchasers have access to virtually unlimited production capacity across four continents, alongside automated pricing and competitive sourcing. A diversified supply chain is no longer undermined by cost, only by those unwilling to change.
As investment in resilience increases, a distributed supply chain network will become the foundation of manufacturing. Globality – moving operations abroad to cut costs – will be traded for diversity, as businesses and nation states seek efficient, dependable and hardened supply.
Risk is increased by long, global supply chains, ever-shrinking product lifecycles, and increasingly volatile and unpredictable markets. While no sure way exists to mitigate all risk, having access to a decentralised manufacturing ecosystem provides the ability to react to, model for, and thrive from, unforeseen events.
Empowering global innovation
As well as building resilience, investment in a decentralised model disseminates manufacturing sites, technology and skills. Rapid digital advancements have made small scale, local production a reality, creating vast new opportunities.
The model creates jobs globally, and locally, and increases value-added output. Technological developments enable those with limited resources to design, manufacture and deliver an innovative product in a short space of time. A new generation of engineers is needed to usher in a new era of entrepreneurship in the developing world – decentralised manufacturing opens up new opportunities and incentivises innovation.
A tech-based model
A decentralised model comes with significant additional benefits. In the perfect scenarios, items could be produced locally with the delivery process fully automated to maximise efficiency. While reducing risk by shortening chains, it would also reduce emissions from transportation, which in total accounted for over 24% of global CO2 emissions in 2016.
An entirely localised approach is not yet feasible, but there is no barrier to the use of a global network of manufacturing facilities to produce product at the most efficient site possible. Moving to a flexible model, which embraces analytics and artificial intelligence, to create a fluid, real-time view of material pricing, production and delivery, doesn't just benefit manufacturers, consumers and the economy, but also the environment.
Reinforce the workforce
We are faced with the reality that companies will have to lay off staff just to survive. However, few can argue against the workforce being the most crucial element of a post-crisis strategy. Those companies with a set of reliable, skilled workers are better prepared to ride out disruptions.
The business community is often guilty of focusing on materials, manufacturing, production, and distribution. Workforces are approached locally – a strike, or lack of skills, affecting a specific area. This ignores the fact that all supply chains are supported by other systems such as transport, power and healthcare, all of which require a healthy and motivated population.
Centralised models do not account for these critical workers. They rely on output remaining steady and infrastructure functioning as usual. We now know that all localities can be rendered immobile and we must plan accordingly, integrating contingency plans to ensure systems cannot break, and we can support those on the frontline.
The business priority paradigm
Resilience has not been a priority for years – with complacency and existing long-term supplier relationships lulling many firms into a false sense of security.
This pandemic has brought reality into sharp focus. Seismic shifts have reached the very end of supply chains – with consumers changing the way they shop and what they purchase at an unprecedented scale and speed. This demand-supply equation will change again in the weeks and month to come, and the market must be ready.
Businesses and governments must strengthen their foundations before hurrying to fix the roof on a rainy day. Crucially, this means moving away from a single supplier of goods, services or skills and looking to create a system that can cope with change. While a distributed manufacturing system is just one part of a truly resilient ecosystem, its readily available and potentially revolutionary.