Post-coronavirus, supply chains will never be the same again, and businesses will have to go through an interim stage to bridge the gap in the transition to new ways of operating, according to a new DHL paper.
Amid great uncertainty, what is clear is that businesses won’t launch abruptly into this new normal. An interim stage, called the “pre-new normal,” bridges the gap between lockdown and the new normal, and is crucial for short- and long-term success.
“The world is changing, and businesses—as well as supply chains—must change with it,” said the paper titled “Post-Coronavirus Supply Chain Recovery: The Journey Towards the New Normal.”
“However, it is simply not practical to go from today’s crisis situation to immediate, full-scale operation. So it makes sense to think about and plan for an intermediate phase.”
The report tackles post-coronavirus scenarios based on the virus’ impact on key supply chain drivers—resilience, demand, transportation and warehousing, and workplace.
Supply chains will reshape themselves around resilience, flexibility, and robustness, with more diversified manufacturing, and multiple sources of supply, said the report.
Diversification of supply chains for more resilience was already considered by many businesses prior to the coronavirus pandemic.
The impact of the lockdown has highlighted the added benefits and flexibility of these more distributed networks, and although their inventory holding costs may be higher, the result is greater speed to market and improved resilience, the paper said.
On demand as driver, the journey from lockdown to pre-new normal will require a reassessment of today’s supply chains based on a changed environment and a potential new set of priorities.
The new normal is likely to involve quite different patterns and priorities in what consumers are demanding. Consumers are likely to prioritize home-based activities over those that involve exposure to potentially risky social environments.
They are also likely to buy through multiple channels, partly as they diversify their supply bases to maximize security of supply, and partly as they make more use of online shopping to minimize face-to-face exposure to potentially risky retail environments.
“Given coronavirus-induced volatility in demand, and changing tastes, and given also the difficult trading environment posed by recessionary economic conditions, it is reasonable to expect a growth in direct-to-consumer selling, sidestepping normal retail channels, even in industries that have traditionally relied heavily on established retail channels to market.” said the paper.
Meanwhile, transportation-, warehousing- and workplace-related changes connected with social distancing and disease prevention can be expected, said the report.
Longer term, these changes could accelerate the trend towards working from home in the case of office-based workers (which may in turn accelerate the pace of digitalization initiatives), and towards robotics and automation in the case of physical goods handling.
“Innovation and scaling new technologies such as robotics and automation, IOT and data analytics will be crucial to success,” said the report.
The report also suggests specific business actions and focus in the pre-new normal, including:
- Assess crisis scenarios and emergency plans
- Closely watch suppliers beyond tier 1
- Strengthen and reconfigure supplier network
- Drive automation and digitalization
- Consider alternative/additional distribution channels
In the new normal, businesses should:
- Diversify in terms of geographies, suppliers, business models, products, and customers
- Ensure a more holistic view on risk management
- Assess new business models
Photo by Julian Schultz on Unsplash
