COVID revealed supply chain weaknesses – but also the benefits of agility
When the COVID-19 shutdown hit the economy, the impact was immediate and brutal — especially for many businesses at the consumer goods coalface.
The evidence was unavoidable: everything from empty shelves in the supermarkets to angry YouTube videos by frustrated consumers. The reaction revealed the customer impact for businesses that simply were unready and ill-equipped for massive shifts in demand and a huge overnight surge in ecommerce.
Worse still, many faced devastating shortages in key product lines, according to the authors of a new report by Which-50 and SAP and the Which-50 Digital Intelligence Unit called Respond, Prepare and Reimagine.
In such a climate those managers who were able to make and execute decisions quickly, despite an environment of uncertainty, best managed the disruption.
Indeed, for those with agility, there were decisive actions they could take.
In the US, Lululemon and Levi’s turned closed stores into miniature fulfillment centres. In Australia, Kmart, which stayed open during the first national lockdown, closed three stores to customers — transforming them into fulfillment hubs for online orders.
Other retailers, such as Accent Group and Super Retail Group, leveraged investments in ecommerce which allowed them to ship products from stores.
That trend is set to increase among retailers as they adjust to the medium-term reality that trading conditions will not return to normal until a vaccine or effective treatments to COVID-19 emerge, according to the report.
Of course, the shopfront is just the most visible area of impact. While retailing represents the point at which supply chains interact with consumers, the impact of COVID-19 was felt throughout.
The logistics network that underpins Australian commerce never anticipated such massive and immediate adjustments to purchasing behaviour.
Operators had to deal with not only different degrees of business disruption but also interstate border closures and the impact of a 90 per cent decline in international travel. Trade may have not been technically affected by new laws or regulations, but the people who work the docks, drive the trucks, and staff the factories and the warehouses certainly were.
In those early days of disruption, many carriers and logistics providers needed to build short-term fixes on the fly to manage dramatic changes in customer demand and employee health and safety.
Those changes ultimately also fed back into production and manufacturing. The problem is not just getting the finished product to the customer, it is also getting the raw material to the factory, and from the factory to the warehouse.
For supply chain executives, long considered operationally important but not necessarily strategically significant, the decisions they were making suddenly had bet-the-business implications.
To learn more, download Respond, Prepare, and Reimagine
This article is published by Which-50’s Digital Intelligence Unit (DIU) on behalf of SAP. DIU Members such as SAP pay to share their expertise and insights with Which-50’s audience of senior executives.