Manufacturers leverage COVID-19 supply chain practices to prepare for Brexit
28 October 2020
Due to COVID-19, manufacturers suddenly had to change their strategies to ensure their supply chain during the pandemic.
There have been many challenges in the past for the manufacturing supply chain, such as the 2001 recession, SARS, 2011 Tohoku earthquake, 2016 oil crisis, and Brexit. Although there have been other pandemics such as swine flu and Ebola, the COVID-19 pandemic was something the modern world had ever seen before.
A survey by researchers at WMG, University of Warwick, saw 249 medium-to-large manufacturers – from the food and beverage industry to automotive, and pharmaceuticals to electronic equipment – respond to the survey about their supply chain resilience in the current state and future potential.
They found several impacts from the COVID-19 pandemic, including:
• 58 percent of firms are still experiencing a decrease in demand three months post lockdown
• 66 to 73 percent of firms have been effective in responding to increases and decreases in demand
• Buffer management, multi-sourcing and visibility were favoured over agile production networks
• Cash management and securing supply were critical initial responses to the COVID-19 crisis
• 84 percent of firms found their planning systems were effective, but still required human intervention
• The most apparent bottlenecks to their supply chain were people issues, such as warehouse staff being in quarantine at home.
The researchers then assessed manufacturers supply chain resilience in three different times, business as normal, during COVID-19 and preparation for Brexit. For each time period, they identified how six supply chain resilience practices that could be used proactively (pre-disruption), reactively (during and post disruption) or both. These included:
1. Supply chain planning – demand forecasting and contingency planning (proactive)
2. Visibility – Having access to real time data (proactive)
3. Collaboration – Working with SC partners to deliver customer value (proactive & reactive)
4. Buffer management – Utilising inventory and production capacity to enable material flow (proactive and reactive)
5. Flexibility – Establishing multiple sourcing options (proactive and reactive)
6. Adaptability – Transforming the SC in responding to dynamic business environment (reactive)
In normal operation, firms generally found their practices to be effective. However, there was opportunity for improvements in visibility and collaboration to support improved supply chain planning. Firms also said they have been effective in managing buffers in normal operation.
During the COVID-19 pandemic, firms utilised supply chain planning as a response to the pandemic with effective planning systems reported by 84 percent of manufacturers. However, this still required a high degree of human intervention.
Buffer management and flexibility were found to be less effective than in normal operations. The survey found that 55 percent of manufacturers used inventory as their primary buffer against disruption, with only 32 percent utilising flexibility within the agile production systems of suppliers. Inventory buffers, whilst effective if the disruption creates an upturn in demand, can be catastrophic to cash flow if demand drops.
Compared to COVID-19, when it comes to Brexit, researchers found that an increase in collaboration has led to improved supply chain visibility and planning. However, the uncertainty of Brexit is a cause for concern in terms of supply base flexibility, with firms unsure of what type of response will be required.
Professor Jan Godsell from WMG, University of Warwick comments:
“It’s interesting to see that the lessons manufactures have learnt in developing supply chain resilience practices in response to COVID-19 pandemic are helping manufacturers to prepare for Brexit.
“However, the uncertainty of Brexit, particularly in terms of the impact of flow of material, is challenging for developing supply base flexibility. Whilst manufacturers can proactively prepare for Brexit, a high degree of adaptability will be required to buffer against the unknown.
“All manufacturers should consider assessing their current level of supply chain resilience to identify the areas in which their current supply chain resilience practices could be developed. Working collaboratively with supply chain partners to improve supply chain visibility and planning are the key building blocks.
“More effective use of inventory and capacity buffers, and flexibility within the supply base, can further improve resilience. Some disruptions cannot be predicted, and supply chains need to the capability to adapt.”