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How COVID-19 Will Prepare Supply Chains for the Next Disruption

Global supply chains have historically faced myriad forms of disruption – from weather events… to the Amazon effect… to Brexit… to trade wars… and now to the COVID-19 outbreak. And with each disruption comes ambiguity regarding a) how shippers and customers will be impacted and b) how long the disruption will endure.

ebook logistyx quadrant Choosing a TMS for Parcel ShippingWith regard to COVID-19, the answer to the latter could be grim.  According to Ethan Harris, head of global economic research at Bank of America, “The shock to supply chains is deeper and more sprawling than the trade wars of the past two years and likely to be more prolonged than the storms, earthquakes, or floods that have been a source of stress for major industries in the past.”  Oxford economics echoes this prognostication, estimating the COVID-19 outbreak will cost the global economy $1.1 trillion.  And Dun & Bradstreet similarly weigh in, predicting approximately 5 million businesses around the world could be impacted.

Unfortunately, our early observations here at Logistyx are in line with these statistics.  We’re seeing multiple industry sectors impacted in some way, and we’re finding the reactions to these impacts fall into one of three categories:

1. React

Companies have had to react to the epidemic because they were unprepared. They either have urgent PCR activity to support their supply chain operations or have implemented cash conservation measures until clarity with respect to the longevity of the situation is better defined.

2. Recover

Companies are planning for recovery after the pandemic.  Current estimates project we will begin to see relief in Q3, and companies are preparing now on two key supply chain fronts:
a) Re-establishing supply chain projects and activities, and
b) Navigating a very short preparation window for Peak Season.

3. Prepare

Some companies are already establishing programs to prepare for the impact of another unforeseen situation.  Unplanned downtime is being used to strategize how to minimize future disruptions, some of which includes Disaster Recovery Plan and Continuity Plan upgrades, increasing carrier access and connectivity, cloud-based system upgrades, and increasing supply chain visibility programs with Control Tower applications.

Retailers Prepare Now to Return to Normal Later

Currently, Logistyx is managing an influx of requests to support companies in the Recover and Prepare stages.  The vast majority of retailers in particular are aware a 100% focus on the immediate situation may have unfortunate consequences once the world exits lock down and returns to something approaching normal. In fact, we have many retailers going through system upgrades now, so they are not impacted later during Q3/Q4 Peak.

In addition to taking steps today to successfully navigate a compressed timeframe for Peak planning, many retailers are also considering that consumer behavior may change forever.  Let’s face it: even the most ecommerce-phobic consumer may place their first grocery order online to avoid crowds, be satisfied with the experience, and emerge from this pandemic a convert.  Online retailers will of course benefit enormously, and channel strategies for legacy retailers and brands will need to radically shift as a result if they are to survive. Retailers that quickly identify what this means for their supply chain and technology infrastructure and pivot their channel strategies accordingly will gain a competitive edge.

Cloud Technology Decreases Supply Chain Risk

In addition, we are receiving a number of requests from manufacturers, retailers, and 3PLs alike looking to digitize supply chain management and move as much of their technology stack as possible to the cloud.  The goal is to improve the speed, accuracy, and flexibility of their supply chains by building a single source of truth, and a digitized supply chain improves a company’s ability to anticipate risk, improve transparency and coordination across the supply chain, and manage the issues that arise from increasing complexity.  Retailers, for example, with the digital technology necessary to flex omnichannel fulfillment muscles such as ship-to-store, order pickup, and ship-from-store, have been ahead of the game this go-round, and others are learning from their example and positioning themselves accordingly for the next disruption.

Control Tower Improves Transparency

Finally, many companies are leveraging Control Tower technology to track potential delivery disruptions and share information easily. By improving the visibility of a product’s journey from warehouse to consumer, or store to consumer, or even store to store, they’ve found they’re in a better position to pre-empt delivery delays and communicate real-time information with customers, preserving brand loyalty during this unusual time.

Furthermore, Control Tower and Business Intelligence technology also normalizes shipping data and enables quick, real-time analysis.  Companies can look at their transportation costs in a deeper way and inform decision making.  For example, rate shopping – critical functionality at a time when surcharges are increasing – can be executed quickly and without an intense reliance on human resources.  Instead of scrambling at the last minute, companies have a lot of information at their fingertips within minutes of a potential disruption.

Act Today on COVID-19 Supply Chain Disruptions

Currently, the COVID-19 pandemic has most companies making substantial modifications to their supply chains to avoid disruptions. The long-term question is: what lessons will they learn?  According to Sunil Chopra, a professor of operations at Northwestern University’s Kellogg School of Management, “There is a human tendency to basically think bad things will not happen if they have not happened for a while.  So if it has been a year or two since the last rare event, we start thinking, ‘Oh, that’ll never happen.’ But the biggest mistake that we can make is to severely underestimate the probability of it happening.”

For more information about how Logistyx’s cloud TMS for parcel shipping can help you prepare for the next supply chain disruption, contact us today.