It is fair to say that, despite the world having wrestled with the COVID-19 crisis for most of 2020, a lack of clarity about what the next six months hold still persists. While governments aim for a semblance of normality in the near future, there are no guarantees that more lockdowns or other disruptions are not on the horizon.
For businesses used to being able to map out their year and forecast what will happen, it is a disconcerting prospect.
Or, as supply chain expert Nick Wilkins puts it, “how much do you actually plan for?”
It is a state of affairs in which Nick has some actual experience. Formerly Senior Vice President for Global Logistics at electronics leader Avnet, he has been in charge of the company’s supply chain during the US-China trade war. “We had both warehouses and suppliers in China and suddenly faced significant tariffs if we imported our product into the US,” he says. With the company potentially facing a big bill thanks to unforeseen and unpredictable external factors, Nick and his team had to come up with a supply chain solution, so they quickly opened a warehouse in Mexico.
As Nick says of COVID-19, “most businesses will have had a pandemic scenario on their supply chain risk register.” So why did we see so much disruption? “Because no-one expected everywhere to be affected. With your contingency planning you cater for a certain percentage of warehousing or suppliers being unavailable. The big focus has always been on one warehouse or IT system going offline, not on how you run all of your distribution centres on half-staff and following social distancing guidelines.”
These are all new challenges which, in Nick’s eyes, require a new type of supply chain, “one that’s agile, flexible, resilient and with in-built redundancy.”
Yet there is another factor that both Nick and Michael McAuley, a digital and marketing transformation executive, believe will be the most significant driver in supply chain transformation: changing consumer behaviour.
“The customer is changing,” says Michael, pointing to recent research that shows nearly half of consumers believe the pandemic will have a permanent impact on the way they shop, with 47% increasing the number of times they shop online. “There’s been a lot of talk about the impact of ecommerce, digital channels and social media on behaviour for a number of years. It’s only now, however, that all those things are becoming truly mainstream.”
For Michael, the pandemic is “the disruption event. It’s the tipping point that is moving consumers and businesses to new, evolving formats.
“What does it mean for brands when retailers aren’t going to see the footfall they once did? For retailers, what do they need to do when restrictions limit the number of people they can have in store at any one time?”
It means new distribution channels. These include the way retailers have pivoted to offer multiple new ways to click and collect, such as John Lewis expanding its partnership with the Co-op to offer nearly a thousand collection points.
“Businesses can’t use the pandemic as an excuse indefinitely,” Michael says. “They’ve got to find ways of getting their products to customers that cut out inefficiencies and waste in their distribution network, while building resilience against future lockdowns, whether they’re national or, as we’re seeing, more localised.”
“Some companies are at a point with their ecommerce that, pre-pandemic, they expected to be at in two- or three-years’ time,” says Nick. “A lot has been achieved in a short period of time, but how sustainable is that in the long term? Do you want to be in a pandemic setting every day? Probably not.”
That means being able to identify what is sustainable in the long-term, and what is a short-term fix, he believes, and making changes accordingly. But that change “has to be fast, or you’re behind the curve. People talk about three-year business transformation projects. That just means it’ll be three years out of date when it’s delivered.”
What does this mean for the supply chain? “Those who have seen it purely as a cost will struggle,” Nick says. “Any change will depend on a company’s appetite for risk. If a board wants a low-risk supply chain, then we might see investment to build resilience and redundancy and an end to the race solely for the lowest-cost supply chain.”
It all comes back to the uncertainty, Nick believes. “No-one knows where it will land, so you need to be agile. You need to be able to change routings, spin up warehouses, move inventory and service multiple channels at once. You must do all this while still managing your own employees and the restrictions local pandemic regulations may place on them, whether it is social distancing, enhanced testing or increased hygiene.”
What this points to, both in the supply chain and the wider enterprise, is what Michael calls “a modular and agile organisation that’s digitally enabled. It needs to match how consumers are now behaving. They are having to react day-by-day to changing government guidance and pressures on their own personal circumstances, and so they’re evolving their routines and consumption habits very quickly.
“Ultimately, for brands it about knowing their customers, understanding how they’re changing and building your operations accordingly".