Building Resilient Supply Chains
By Xiaoyu Zhai and Robert Webb
How the COVID-19 Pandemic is reshaping globalization and what technologies can mitigate the problems created?
When the pandemic hit in March, the C-suite of multinational firms realized that, after enjoying years of globalization, they have now got a series of problems on their hands. A global health crisis has broken out, and the number of mobility and export restrictions have skyrocketed[i]. The globalization tactic, by transferring all manufacturing facilities to Asia for achieving a highly efficient and just-in-time supply chain, which worked well for growth strategy in the last few decades, leads to a point where no alternate source of production can be found[ii].
Clearly, certain underlying beliefs that drove globalization are no longer valid. Global enterprises now seek to achieve resilience through diversifying and regionalizing their manufacturing and supply networks. This approach is seemingly contradictory for profitability as it does not fit the classic economic theory - economy of scale. However, given heightened geopolitical tensions, trade restrictions, and nationalist policies, it seems unlikely the global economy will return to open trading anytime soon[iii]. Thus, resilient supply chains should be built against unpredictability.
Meanwhile, advances in digital technology are driving the continued evolution of supply chains. Companies should consider leverage the power of automation, assistance, and augmentation characteristics of technologies while reforming their global supply chains[iv].
For automation, robotics processing automation (RPA) would enable repetitive tasks or processes to be automated and the human element can be removed partially or completely. On the one hand, this technology could mitigate the rising costs caused by moving production plants to other countries. On the other hand, with low or zero involvement of labor in manufacturing or transportation, companies could reduce the possibilities of transmitting coronavirus. Taking the meat processing plant as an example, since it is difficult to keep workers two meters apart when they are working on fast-moving production lines, thousands of workers tested positive with COVID-19 at meat processing plants and abattoirs in UK, Germany, France, Spain and US; plants, undoubtedly, were forced to close[v]. By incorporating advanced RPA and reduce the number of workers at the time of pandemic, supply chain safety can be better assured.
Furthermore, technologies could assist and augment higher value-added activities. Advancement in cloud computing and 5G coverage could make AR more scabble, ultra-fast, and transportable[vi]. AR will soon become accessible everywhere, allowing employees in manufacturing sites to receive guidance from experts in real-time from any locations in the world. Instead of retaining large teams of skilled maintenance workers at local plants, companies could keep smaller teams on hand at each location, supporting them with global experts spread across the world and connect digitally. Besides, the crisis demonstrates the need for accurate and real-time information to help businesses make informed decisions and mitigate the costs of supply chain disruptions. Through implementing robots, IoT, and predictive analytics, decision-makers would be able to quickly capture the required internal and external data and predict possible supply chain disruptions. This would, in turn, help global enterprises solve challenges related to operations planning, production planning, inventory management, and risk management activities.
To conclude, there are multiple approaches and technology solutions to build resilient global supply chains in response to the disruptive forces changing their globalization strategy. More investment in reforming supply chains is necessary, even though the gains and the return on investment may not be immediate.
[i] Wto.org. 2020. CROSS-BORDER MOBILITY, COVID-19 AND GLOBAL TRADE. [online] Available at: <https://www.wto.org/english/tratop_e/covid19_e/mobility_report_e.pdf> [Accessed 2 November 2020]. [ii] Bhattacharya, A., Lang, N. and Hemerling, J., 2020. Beyond Great: Nine Strategies for Thriving in an Era of Social Tension, Economic Nationalism, and Technological Revolution. Hachette UK. [iii] Aylor, B., Datta, B., DeFauw, M., Gilbert, M., Knizek, C. and McAdoo, M., 2020. Designing Resilience Into Global Supply Chains. [online] BCG Global. Available at: <https://www.bcg.com/publications/2020/resilience-in-global-supply-chains> [Accessed 2 November 2020]. [iv] Foster, C., 2020. Building Supply Chain Resilience Through Digital Transformation. [online] KPMG. Available at: <https://home.kpmg/xx/en/home/insights/2020/06/building-supply-chain-resilience-through-digital-transformation.html> [Accessed 2 November 2020]. [v] Reuben, A., 2020. Coronavirus: Why Have There Been So Many Outbreaks In Meat Processing Plants?. [online] BBC News. Available at: <https://www.bbc.com/news/53137613> [Accessed 2 November 2020]. [vi] Felker, R., 2020. Leveraging Digital Technology To Create A More Resilient Supply Chain - Global Trade Magazine. [online] Global Trade Magazine. Available at: <https://www.globaltrademag.com/leveraging-digital-technology-to-create-a-more-resilient-supply-chain/> [Accessed 2 November 2020].