Businesses, particularly those that have complex supply chains, are used to rolling — and reacting — to whatever the economy throws at them. But the pandemic provided hurdles that even those with detailed backup plans couldn’t prepare for. It led to disruptions seen from food & beverage, to electronics, consumer goods and nearly any other global manufacturer.
According to EY, about three out of every four companies (72%) experienced disruptions to the supply chain, with 57% reporting serious disruptions. This forced companies to ask tough questions: where would they cut investment, what ulterior options existed and what will keep the company functioning? With so many variables concerning the very heart of the supply chain, it’s not surprising that businesses felt the strain.
Where that strain occurred, however, depended on the sector of operation, whether demand for the products grew or not during the pandemic, and how impacted employees were by COVID-19. Due to the vastness of the impact, we look at different areas where the supply chain headaches occurred and how businesses responded.
Demand Declines Push Firms Into Survival Mode
Organizations know that they may face times when sales lag. But planning for the moment when sales disappear overnight? Well, that isn’t often included even in most doomsday scenarios that risk planners provide. Yet, for certain sectors, the demand slowed to a crawl within days.
Food suppliers of restaurants suddenly had product, but no one to sell to. Office suppliers saw firms shut headquarters, shifting to work from home, reducing the need for office tools. And industrial companies experienced near universal loss due to a lack of activity in other sectors.
Such a decline in demand can destroy partnerships and make it difficult to ramp up production once demand returns. Responding to the disappearance of customers required working with suppliers and partners to reduce the flow of product. But businesses also took a more aggressive approach to their supply chain, creating new lines of sales, to ensure operations would continue, post-pandemic. Some restaurant distributors, for example, sold directly to consumers, allowing for some level of production to continue. This also allowed these firms to remain at the ready for when demand – and production – would increase again.
Surge in Demand Requires Redistributing Resources
On the other side of the COVID demand curve coin, certain industries saw a surge in need. Consumer products provided the starkest example of this swell. Canned goods and toilet paper, for example, became items that grocery stores had to ration due to hoarding by consumers.
For companies that experienced this heightened impact, it resulted in shifting resources to allow for greater production. Instead of launching new products or investing in new business lines, many of these manufacturers had to shift the investment into the supply chain to encourage continued production of the items that had the heightened demand.
These same firms also had to recognize when the demand would loosen to ensure the production didn’t overheat as consumers no longer sought the materials at the same rate.
Increased Trade Barriers Resulted in Better Emergency Planning
Supply chains have become fined tuned internationally coordinated works of art. But when COVID hit, countries had to put up barriers to prevent travel to stem the spread of the virus. This left companies in a bind as they had to determine which partners could continue to operate, which supplies could cross country lines and where any holdups could occur.
In response to closures, some companies went more local with supplies. In a July 2020 survey of supply chain leaders, 40% said they planned to work towards building resiliency in the supply chain by moving to nearshore solutions. This tactic includes finding suppliers in countries nearby or in the country where the manufacturer’s target markets reside, to reduce the impact of closures that hit entire borders. Another 38% said they plan to regionalize the supply chain.
This also left firms working on the fly to find other suppliers that can offer the same services, in case issues arise again. Many have developed emergency plans to detail options for quick adjustments and suppliers that they can tap on a moment’s notice if the sudden closures of ports, cities or countries occurs in the future.
The Lack of Skilled Labor Forced Technological Innovation
Some industries require the flow of labor in-and-out of a country to operate at full capacity. The farming industry ran into a lack of skilled labor, with countries closing borders. About three out of every four US farm laborer is an immigrant, migrant worker or someone on a farming visa. But with borders closed, it left these organizations unable to find a full supply of labor. This impacted much of European farming as well.
Farming isn’t the only industry that faced this hurdle. Manufacturers had employees that could no longer work on the floor, due to COVID outbreaks. It meant either stop production or come up with another solution.
In response, many manufacturers implemented safety controls, but they also increased the use of automation and robotics, when possible, to ease the labor concerns. Nearly half of firms planned to increase the speed in which they implement automation or the use of robotics, in response to COVID.
Shutdowns Hit Specific Factories
The pandemic has provided organizations with the realization it needs to have a clearer understanding of the potential dangers and weaknesses within its supply chain. In a survey, 83% of enterprises said they’re now more aware of the issues their supply chain faces, especially those that can arise due to shutdowns. Whether the shutdown occurred because of a COVID outbreak or due to failing business, companies have had to build in better risk practices, which included adding more partners that the organization could tap if a shutdown suddenly occurs.
Businesses also have tackled this issue another way: by understanding every part of the manufacturing process, to provide visibility in the supply chain. This allows them to know every partner or subcontractor that handles the parts or tools during the building process. It also provides transparency into how parts move through the factory floors and into the hands of consumers or clients. By investing in the technology to provide this insight, companies have better clarity where potential shutdowns may occur or have tools to circumvent the shutdown, when it takes place.
It’s an effort to never be caught off guard again, which may be the greatest lesson from the pandemic for the supply chain.