The supply chain is the backbone of modern business, and it faces some unprecedented changes these days. Supply chain managers have faced an unusually extreme set of challenges amid Covid-19. These difficulties will transform the industry as the pandemic continues and eventually subsides.
These ongoing changes will be beneficial, ultimately leading to more resilient supply chains. Still, the process of getting to that point may come with difficulty. With that in mind, here are five changes coming to supply chains that managers can prepare for.
De-consolidation of suppliers
Geographically consolidated suppliers caused global supply chains quite a headache at the onset of the pandemic. Companies that relied on manufacturing plants in China came to an abrupt halt when early Covid outbreaks stopped Chinese production. In response, supply chains in the future will diversify their suppliers.
Post-Covid supply chains may pursue reshoring or look for a variety of international suppliers. Either way, the pre-Covid trend of consolidation won't last now that the pandemic highlighted its inflexibility. In the coming months and years, supply chain managers will likely have to find ways to de-consolidate.
Higher expectations for visibility and stress tests
After the pandemic, corporations will expect more flexibility from their supply chains. As a result, they'll ask for more visibility and most likely perform more stress tests. The need for verifiable evidence of resiliency is now more pronounced, and companies will react accordingly.
Even before Covid, month-long disruptions occurred every 3.7 years, leading to considerable losses. After this most recent extreme, supply chain managers can expect higher standards from their partners. The supply chains that provide more transparency, including frequent stress tests, will perform best.
Increased AI adoption
Post-pandemic supply chains will also see an uptick in AI adoption. These technologies have always been beneficial, but their propensity for flexibility and efficiency are even more valuable now. AI will alert companies of potential disruptions, highlight inefficiencies and improve international relations.
For example, supply chains may use AI translation services to communicate with international partners better. The effect of these services is equivalent to a 35% decrease in distance between countries. Advantages like that will be indispensable in a world that favors global supply chain resiliency.
In addition to de-consolidating their suppliers, post-Covid supply chains will also shift towards regionalization. Companies will look to domestic sources not just for parts or manufacturing services but in fact for most of their operations. Consequently, supply chain hubs themselves will move closer to the company's home turf.
That's not to say that global supply chains will disappear entirely, but companies will primarily prefer closer partners. That movement doesn't just include reshoring efforts, but also near-shoring to places like Mexico as well. While trans-oceanic supply chains won't die out, they will diminish in comparison to regional logistics chains.
The efficiency advantages of robotics will continue to be relevant, but automation won't skyrocket as some have expected. The pandemic has also brought attention to the human element of doing business. After Covid, supply chains will adopt a more balanced approach in hiring more workers and automating simultaneously.
Amazon, a company famous for its automation, announced 100,000 new positions to provide employment and sustain supply chains. While automation has obvious benefits, post-COVID, the world will likely expect more empathy and humanity from corporations. Businesses, in turn, will temper their automation efforts and emphasize hiring more people.
Supply chains are moving toward resiliency
The Covid-19 pandemic will be a historic turning point for supply chain management. It's not everyday that businesses experience such a clear and impactful revelation of their shortcomings. These disruptions will, in turn, lead to better and more resilient supply chains.
The changes ahead of supply chain managers are daunting but necessary. As the world emerges from the pandemic, it will do so with improved flexibility and resiliency. Post-Covid supply chains will be stronger than ever.