The new world order is emerging and there are conflicting signals. The physical borders are closing which is disrupting the flow of goods and professionals. The remote WFH era is ushering in a virtually borderless world for companies looking for talent. This has opened up the need to develop new corporate strategy in corona times to remain viable in the medium term.
What Has Changed?
The redefined globalization has brought changes in the supply chain ecosystem as well as the equations between countries involved. COVID-19 pandemic has put the entire system upside down. This has left businesses in search of a sustainable sourcing landscape and hence a major shift here. It has created the need to be regionally reliant to stay closer to the markets and build a resilient system.
Implications On Supply Chain
Considering the impact on supply chains, geopolitical issues may raise barriers at borders. Domestic political compulsions might push for bringing off-shored manufacturing jobs back home. Concerns about national security might call for realigning supply chain partnerships (as triggered by the ban on Huawei). The desire of businesses to reduce the carbon footprint might accelerate the drive towards shorter and more regional supply chains.
Each decision taken by business leaders today needs careful examination from the business risk perspective. This can be by keeping in view the classic supply chain metrics of cost and service levels while evolving new sourcing strategies.
For manufacturing companies, new strategies could entail sourcing locally everywhere while continuing to expand operations globally. In a country like India, that witnessed mass labor migration during the shutdowns, a risk mitigation strategy would be to go for ‘dark factories’ with complete automation (that can operate 24/7 without lights). However, the social impact of jobless economic growth has to be thought through as well.
Why Realign The Supply Chain ?
The dynamic labour costs, technological advancements, pandemic etc have all led companies to rethink as well as realign their supply chain. Global supply chain has failed to withstand the challenges thrown by the pandemic and it is the regional supply chain that has come to rescue the businesses. So while realigning the supply chain what becomes inevitable it factors in uncertainties that might break longer chains easily. The key is to create a small, crisper and more location independent system. The focus now needs to centre locally without discarding far flung supply chains.
The aim should now be to leverage the situation and reshape the supply system that is more resilient. Regionalization and diversification of the business has also created the need of aligning the manufacturing and supply networks accordingly. And while the shift happens, the actual future of a supply system resilient enough to stand through uncertain times is difficult to determine at this point.
Approach to Adapting Supply Chain
BCG in the article ‘Designing Resilience into Global Supply Chains’ offers the following six-step approach to adapting supply chains and establishing competitive advantage.
- Defining And Measuring Resilience
- Align design principles with the new reality
- Segment the portfolio by supply chain risk and understand performance drivers
- Identify levers and options at the segment level
- Evaluate supply chain design options for each segment
- Pressure test design choices across the company
- Put the network redesign in place and monitor performance
Thriving in the current era of crisis and uncertainty will not be easy for businesses. Taking decisions and making corrective action plans by the CEO’s will become an important tool for sustainability in the market. A realignment of supply chain will be amongst the top the list for at least some years to come, only then can enterprises cruise through the emerging globalism and disrupted ecosystem resulting from it.