Report: Pandemic hits companies hard on the supply side

Supply chain organizations have learned some tough lessons from the Covid-19 pandemic, and many say they will implement better strategies to deal with similar events in the future, including creating “comprehensive pandemic plans,” according to a survey from data and analytics firm Resilience 360, a division of transport and logistics giant DHL, and the Business Continuity Institute, released earlier this month.

Covid-19: The Future of Supply Chain surveyed 350 manufacturers and retailers and revealed that most were hit especially hard on the supply side by the pandemic. Going forward, manufacturers and retailers say they plan to diversify their supply base and source more locally, as well as increase their use of third-party logistics services (3PL) providers.

“[Less than] half of organizations had a pandemic plan in place [that] they felt was adequate to cover supply chain issues during the pandemic. As a result, the majority of organizations will now make changes to their plans going forward,” the researchers wrote. “Just over half of organizations will write a pandemic-specific plan and include supply chain in more detail, while another third will alter their general continuity plans to strengthen supply chain-specific elements.”

Nearly three-quarters of organizations said they encountered “some or significant” detrimental effects on the supply side of their operation, and nearly 65% reported the same on the demand side. Twenty percent reported an increase in demand for their products and services, including IT, telecommunications, and pharmaceutical organizations; others said they launched new products and services that catered to different customer demands during the pandemic.

As a result, more than 57% of respondents said they will diversify their supplier base in a post-Covid-19 economy, with many saying that means reducing their reliance on the Far East. About 30% said they will source less from the Far East, with 13% saying they will source less from China, in particular. Two-thirds of respondents said they plan to source goods more locally post-pandemic, with 21% saying they will move “a considerable number of suppliers more locally,” according to the survey. 

“Although a further fifth will be engaging in more stockpiling post-pandemic, many are using local sourcing as a more cost-effective way of ensuring goods can be acquired quickly and efficiently,” the researchers said.

The research also revealed that 3PLs may benefit from the crisis, with more than 12% of respondents saying they intend to increase their use of 3PLs going forward.

The survey also found that: 

• The pandemic has caused many organizations to carry out due diligence deeper in their supply chains going forward. Although organizations had largely carried out good levels of due diligence (such as determining suppliers’ location and obtaining business continuity plans) among their tier 1 supplier base, such due diligence started to tail off beyond tier 2. The pandemic caused disruptions to many organizations’ supply chains beyond tier 1: many European-based manufacturers, for example, are heavily reliant on Asia for components, which caused issues for many organizations’ tier 1 suppliers. As a result, nearly two-thirds of organizations said they plan to perform deeper due diligence going forward, the researchers said.

• More organizations are using technology to help them perform the required due diligence. There has been a discernible increase in the use of technology during the pandemic to help with supply chain planning and strategy: 57.1% of organizations are using their own internal systems and spreadsheets for supply chain mapping, [and] 13.5% are using specialist tools–a notable uptick on the 22.6% recorded in the BCI Supply Chain Resilience 2019 report, the researchers said. In addition, of those who are not currently using tools, a fifth are now considering purchasing a specialist tool, the researchers also said.

For more coverage of the coronavirus crisis and how it's affecting the logistics industry, check out our Covid-19 landing page. And click here for our compilation of virus-focused websites and resource pages from around the supply chain sector.