It is a well-known fact that 2020 was a bad year in terms of supply chains. The panic that followed China’s February lockdown made some of the busiest ports in the world virtually unusable and led to millions of people losing their jobs, sometimes permanently.
Even before the second wave European national lockdowns in November, supply chains were still reeling from the trauma of last winter.
It is evident that businesses will continue to be disrupted even if there is a vaccine or another effective way to combat the coronavirus.
Assessment of the coronavirus battlefield
Although it may seem like a long time ago, there is still a large backlog of delayed goods awaiting shipment from China. The country’s unprecedented decision to lockdown Hubei province was a supply chain earthquake. Aftershocks still continue to be felt today.
Despite the fact that mass public gatherings are now allowed, life in the province seems back to normal.
Production houses that focus on a variety of materials, including textiles, garments and electronic components for mobile phones, medical equipment, and other products, are far from the norm. It will take a while for them to look the same as before the coronavirus.
Similar stories can be found in the industrial zones of South Korea, northern Italy, and Japan. Both were severely affected in the spring with severe contractions in their export capacities.
What can businesses do to minimize the damage future shocks could cause to supply chains?
A new relationship with suppliers
Despite all the doom and gloom, things are improving. The new lockdowns aren’t as restrictive as those in early spring. Scientists know more about coronavirus spread and treatment.
This knowledge will help reduce future trauma to supply chain chains, but we aren’t done yet.
Here’s what to do in the interim: Review all your policies and inventories, then contact your suppliers to do so. Now is the right time to establish a relationship with your suppliers if you don’t already.
It is important that you get to know your suppliers. You will be able to manage disruptions as they occur. You will be able to move from one supplier or another if one is too disrupted.
This checklist from McKinsey Consultants is a good place to start. While every pointer is valuable, the most important is the one that emphasizes the need for greater transparency in the supply chain.
A transparent supply chain is beneficial in all circumstances and is never a liability. But it is vital in this age of coronavirus. This is especially true if your supply chain has multiple levels. It is vital to have a transparent supply chain.
It should be as far back as possible. This includes knowing where your raw materials come from and whether they are susceptible to disruption. Even the largest companies don’t do this, but you should.
If you have not already, it is time to review and rework any pre-existing agreements with suppliers. They might attempt to invoke force majeure if they fail to deliver the goods on time. You can also build closer relationships and think about ways you can help your suppliers to take some pressure off of them.
Your suppliers will be able to get what they need by making concessions, such as lowering delivery deadlines, allowing payments to be made on time, or tweaking your orders. This will help your business.