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Lighthouse - September, 2020.

COVID-19 RESHAPING THE WORLD OF LOGISTICS

With an increasingly interconnected global economy, the impact of the pandemic is widespread. With the overall decline in economic activity, even large corporates are beginning to feel the heat. The governments’ wide range of containment measures has resulted in the shutdown of manufacturing and labor disruption through enforced isolations, travel bans, and border controls.

The pandemic made organizations rethink ways to reposition the supply chain to be more resilient in future threats and disruption.

The key areas are:

1. Safeguarding employees: Employee’s physical and mental wellbeing is to be taken care of. Exercise best in practice corporate social responsibility (CSR) for employee stability. A backup plan should be in place to help affected staff, including increased automation, remote working arrangements, and other flexible resourcing in response to constraints.

2. Assessing supplier risk: A response team needs to be created to facilitate an open and consistent flow of accurate information between key stakeholders, maintain stakeholder confidence, and also to focus on supply chain assessment and risk management. The response team should be able to use alternative modes of transportation and conduct trade-offs according to the needs, cost, service, and risk scenario analysis. Regularly reviewing contracts with key customers and suppliers helps understand the liability involved in the event of the supply shortage. Maintaining a value chain assessment of other risk factors involved helps to understand the reasons for escalating costs.

3. Managing working capital and business plans: It is important to revise cash flow, working capital management, and inventory to predict demand and supply conditions. Review organization-wide sales and operations planning and integrated business strategies to ensure tactical and strategic business planning gets synchronized amongst all business functions. Businesses with data-rich environments can harness procurement, operations, and research and development (R & D) using advanced simulations to identify optimum performance trade-offs.

4. Micro supply chains: The existing model of supply chains is such that the reduction of costs has led to the creation of large, integrated, global networks that gain profit through outsourcing manufacturing to emerging economies backed by long term contracts. However, the pandemic and the increasing trade tensions are encouraging organizations to question the best operating model. At this point, they need to consider the benefit of shifting their present operating model towards micro supply chains.

5. Collaborative supplier relationship: The pandemic simulated environment can be used as a platform with time and investment to build a foundation of trust and transparency that leads to a collaborative relationship with critical suppliers. A shared vision of goals, motivations, and partnerships develops organizational resilience.

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