Post-Pandemic Solutions for 2021 Supply Chains
Last year was hard on supply chains. While many companies show signs of recovery and are implementing Industry 4.0 technologies, embracing eco partnerships, and adopting more consumer-centric business models, many others are still struggling. Deciphering supply chain weaknesses was a concern well before 2020. The pandemic laid bare the “kinks in the links” and made solving those challenges essential. Companies’ worries about survival last year have been replaced with a genuine embrace of innovative workarounds to thwart further disruptions. Below are some of the solutions that forward-thinking companies will use to make their supply chains more resilient, transparent, and efficient in 2021.
Industry 4.0 and Blockchain
More companies will invest in Industry 4.0 technologies—for example, automation, artificial intelligence (AI), Internet of Things (IoT), smart manufacturing)—in the coming year. AI and the digitalization of supply chain documentation using blockchain algorithms enable companies to gain greater efficiency and transparency, such as using predictive analytics to track weather, risk management, political unrest, changes in consumer’s behavior, operational performance, maintenance and downtimes, market fluctuations, and other factors, allowing for faster supply chain adjustments and greater supply chain visibility.
One example of companies embracing blockchain smart contacts is Koopman Logistics, which uses blockchain to regulate the logistics of automotive vehicle delivery. Another, is Amazon’s “Hands Off the Wheel” initiative that uses an algorithm to forecast demand, inventory, and even negotiating prices with vendors.
Amazon, Alibaba, and Walmart use autonomous mobile robots (AMRs) and automated storage and retrieval systems (AS/RS) in the fulfillment process to reduce redundant, tedious, and complicated tasks for humans. Amazon is experimenting with autonomous last-mile delivery with bots, trucks, and drones.
Diversifying Size and Location
Optimizing for cost left many companies’ supply chains vulnerable to risks. Companies are now analyzing the true cost of goods and considering the limitations of having large centralized facilities with spread-out supply chain nodes, without available options to move locations of supply or manufacturing.
“Supply chain security is now being thought about in terms of data and intellectual property security. Alternate sources of supply and routing are becoming a higher priority for supply chain management across more companies and industries, “ states Kevin Keegan, PwC Strategy consulting principal.
Many companies were also considering reshoring due to the rise in labor costs overseas, geopolitical risks, and further restrictions from trade wars. The pandemic brought out the urgency of bringing home manufacturing to shorten supply chains to ensure more reliable production and distribution.
Instead of depending on China for most manufacturing, companies are exploring the options of relocating to smaller hubs in other low-cost countries like India and Vietnam; or nearshoring to countries such as Mexico, Costa Rica, and Canada. Reshoring and nearshoring to bring manufacturing hubs closer to home are future goals for many manufacturers. Companies are also looking at smaller, more regional distribution centers in high-demand countries.
If this trend continues, Canada, Mexico, and the U.S. could see quite a boom in manufacturing. In a survey done last June by Thomas, nearly 70% of businesses surveyed said they are likely to invest to reshore operations to bolster their supply chains.
Collaboration on the Rise
Last year, the pandemic forced supply chain partners to sit down and work together to get products made and delivered. Such strengthened relationships increased the pace of delivery of new products and services, connectivity, advanced technology adoption, capacity for innovation, and access to supply chain partner resources and capabilities. Ecosystem partnerships will drive deeper collaborative sustainability in the future of supply chains, leading to greater profits.
Electricity and transportation are big contributors to greenhouse gas emissions. Many companies are transforming their facilities into eco-friendly warehouses. Using energy management systems to monitor the usage of electricity, heat, water, and gas, these systems are helping reduce the supply chains’ overall carbon footprint.
Many companies were left with vast inventories in their warehouses last year when supply chains were disrupted. Restaurants being shuttered added to products having no place to go. Direct-to-consumer (DTC) delivery and e-commerce were already trending, and sales soared when online grocery shopping became a necessity. According to the Foody Industry Association, food retailers have invested $1.5 billion in technology and online delivery expenses.
Many small food retailers were already familiar with and had DTC processes in place. PepsiCo, Kraft Heinz, and Ben and Jerry’s were some big-name brands that shortened their supply chains to put the product directly into the customers’ hands with DTC. Grocery e-commerce is one of the fastest-growing categories in online sales because consumers realize the convenience of shopping from home. This trend is likely to grow in the coming year.
Businesses are also focusing on aligning their brand values with their customers’ views on responsible and sustainable sourcing of goods. PepsiCo, informed by science-based measures combined with cost-benefit analyses, plans to reduce absolute greenhouse gas emissions across its direct operations by 75% and its indirect value chain by 40% by 2030. Frito-Lay North America in California also plans to increase its supply chain efficiency and reduce emissions to zero or near zero.
Growth During Recovery
A healthy recovery requires healthy supply chains. Similar to a living organism, supply chains need to constantly be tended to support growth. Some companies started before the pandemic; others are starting now. “Enhanced supply-chain management and adoption of digitalization have never been more important,” says Anne Petterd, technology, communications, and commercial partner with Baker McKenzie. “Companies with well-considered supply-chain risk management processes will be better placed to identify the impact of disruptive events on their supply-chain and product offering, providing them with an opportunity to assess how to best respond in tough circumstances.”