Building a resilient supply chain in a post-pandemic world
To better manage risk, companies seek to inject agility into their supply chains with a renewed focus on procurement, customer demand, inventory management, and business partner collaboration.
Victoria Kickham started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for DC Velocity.
Corporate leaders and small-business owners alike are taking a hard look at business continuity planning as a result of the coronavirus pandemic, which devastated the global economy in March and continues to rattle the nerves of business leaders up and down the supply chain. Those who run warehouses and distribution centers (DCs) have seen the problem up close and personal, as they deal with the physical challenges of keeping facilities running during a pandemic as well as broader customer service and strategic planning concerns.
Among the biggest changes in continuity planning over the last six months is how companies view the importance of supply chain agility and adaptability, says Shehrina Kamal, product director at Resilience 360, a supply chain risk management software company.
“We are seeing a major shift in mindset,” Kamal explains. “Supply chain agility needs to be a core part of your operations. We’ve seen companies in the past view this as an optional thing, [but] the pandemic has shown us that in a situation like this, anyone with a supply chain agile enough to quickly adapt will survive. We’ve been saying this, and now companies are seeing that it’s really true.”
Kamal cites growing interest in Resilience 360’s technology platform and supply chain risk management tools as evidence of the change, but there have also been several studies that documented respondents’ lack of preparedness for an event of this scale and their resulting need to re-evaluate their risk management strategies. Over the summer, Resilience 360 and the Business Continuity Institute (BCI) published a pandemic-related survey of more than 350 manufacturers that showed that less than half had a plan in place that sufficiently addressed the supply chain issues they encountered with Covid-19. As a result, more than half—53%—said they planned to create a comprehensive pandemic plan and another 32% said they would adapt their current plans to ensure they cover supply chain issues in sufficient depth going forward.
A separate study by Netherlands-based manufacturing services provider 3D Hubs found that roughly 60% of all companies say the pandemic directly disrupted their supply chain. The firm surveyed 1,300 supply chain professionals and included insights from its own database of 36,000 companies and 240 global manufacturing partners for its Supply Chain Resilience Report 2020. The researchers said the Covid-19 pandemic has been the single biggest disruptive event of the past decade.
As companies look for ways to inject agility into their operations, Kamal and other industry experts say they are focusing on improving supply chain visibility and adjusting inventory strategies—all with an eye toward establishing closer collaboration up and down the supply chain.
FOCUSING ON PROCUREMENT AND DEMAND
Although responding to pandemic-related disruptions has been difficult because of the event’s unprecedented scale, experts say the crisis has revealed a few knowledge “gaps” that companies are now scrambling to address.
“Supply chain visibility is the number one gap,” according to Bindiya Vakil, founder and CEO of supply chain risk management technology firm Resilinc. Vakil characterizes the Covid-19 pandemic as the “black swan of black swan events” that has left many companies searching for better strategies for dealing with disruption.
“I’ve been in supply chain risk management for 20 years,” she says. “There are tremendous numbers of disruptions on an ongoing basis—transportation issues, supply capacity problems, allocation, labor strikes—something is always going on. But with Covid, it was like everything happened at the same time and all within a two-month period.”
By late summer, the situation had improved. Large-scale countrywide shutdowns had eased and disruptions became more localized, making it easier for companies to adapt, she explains. But as many sought to rebound from the experience, they realized they had limited insight into their supply chain operations. On the procurement side, for example, she says businesses found they lacked basic information about their suppliers, such as whom to contact when a disruption occurs. As a result, companies are now taking a “non-spend” approach to managing those suppliers—meaning that they view all suppliers as critical, rather than taking a tiered approach that prioritizes those who get the lion’s share of spending.
Collaborative tools and processes can help too, Vakil says, adding that supply chain mapping is gaining traction. This is a process of identifying exactly where your suppliers are located as well as where their suppliers are located. She says digital tools can help companies gather basic supplier data, such as contact information, details on warehouse and factory locations, and insight into leadtimes.
“[Companies] really need to put a strategy in place to know everything about their suppliers,” Vakil explains. She notes that this should ideally be an ongoing process that includes “keeping a close eye on those suppliers, managing them closely, [and] monitoring their locations—so they are fully aware and abreast of any disruptions.”
Companies also need greater insight into customer demand, especially in light of accelerated e-commerce activity over the past six months. This is causing many to take a closer look at demand planning as they rethink their inventory and order fulfillment strategies, explains Sean Laffere, managing director in the supply chain services practice at Alvarez & Marsal, a global management consulting firm. The first step in the process is asking broad questions about how the pandemic has changed the business landscape.
“Companies need to ask: What effects will a post-pandemic world have on my business? Will this change anything? Am I going to have to deliver products faster than before, and what does that mean from an inventory standpoint?” Laffere explains.
Once they have established that, and based on how they answer those questions, company leaders can begin to look at their existing footprint and determine whether or not they need to ship more regionally, for instance.
“We know we will have disruptions, [but the question is] how do we think about it?” Laffere adds, emphasizing the need for a high-level review of a company’s facility network as well its supply base in making those decisions.
Vakil concurs.
“As we emerge from this, a lot of board-level conversations will happen,” she says. “What did we learn? What would we improve? Every company should ask themselves that.”
CHANGING YOUR APPROACH TO INVENTORY
A company’s approach to inventory may be one of the biggest potential changes on the table. The large-scale disruptions many industries faced at the beginning of the pandemic revealed what Vakil describes as a supply chain trend that leaned too much toward a just-in-time (JIT) model in many cases. As companies rethink their processes with an eye toward enhancing agility, expect a shift to a more flexible approach.
“A lot of companies went too far down the lean and JIT [road],” she says, adding that she doesn’t expect companies to start building bigger warehouses and stuffing them with inventory, but rather, to deploy a more nuanced strategy. “[Companies will] bump up a little inventory and bolster that with a supply chain risk program that is rich in visibility and information—so you can sense disruptions and respond to them faster.”
Brian Deffet, vice president of operations for contract logistics service provider DHL Supply Chain, agrees, adding that DHL is seeing its customers starting to look at the length of their supply chains and potentially localizing more inventory by near-shoring, onshoring, or forward-stocking certain items in order to shorten leadtimes. No matter what approach a company takes, he says, flexibility and collaboration are paramount.
“[The pandemic] has shown companies they need to work collaboratively—not only with [their business] partners, but with their internal departments and partners as well,” he says. “This has brought everyone together to pull in the same direction.”
Kamal echoes those concerns and circles back to the importance of agility and the need to be able to react and make decisions “on the fly.”
“What we’ve seen a lot is companies collaborating more with supply chain partners,” she says. “In order to make decisions on the fly, they need more information [and] better information. If there is anything to take away from 2020, it’s that you’ve got to be prepared for black swan events; you have to treat business continuity and risk management [as a matter of topmost] importance. It’s absolutely critical.”
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.