The economic roller coaster of the first half of the year left many businesses slowing down or shuttering completely, while others found their products suddenly in high demand. Still other businesses needed to shift their focus from business customers to retail customers. All of these factors combined has led to dramatic shifts in the supply chain across most industries.
Collaboration for Now, But Will It Last?
“Right now, we are seeing essential businesses collaborate to find supplies critical to manufacturing medical goods, largely due to the urgency of the moment,” said Sam Dawes, senior manager of industrial and consumer products at West Monroe, a business/technology consultancy. “Behaviors like this are unlikely to sustain the same way once businesses return to prioritizing bottom lines and competitive advantage over ‘the greater good.’ This is especially true when you consider the Fortune 500 / 1000 who have scaled to influence the supply chains and operate both cost effectively and efficiently.”
SMBs Consolidation: Strength in Numbers
Many small and medium businesses have suffered significantly during this period, as economically-stressed suppliers focused on their larger customers, according to Dawes. He said he expects economic contraction to force the SMB segment to evaluate the sustainability of their future. There will be consolidation, which could manifest either via mergers and acquisitions, joint ventures, cooperatives or direct partnerships as this uncertain period extends. When we emerge, these relationships will remain in place, for a period, but they will likely formalize if they recognize they are better together.
“Even before COVID-19, SMBs would work together to increase their buying power to better influence suppliers,” Dawes explained. “Take specialty coffee, for example. Small roasters are forming cooperatives to buy directly from farmers. This allows roasters to share risk, increase purchasing power, and still maintain strong supply chain traceability. Meanwhile, the farmer is getting a higher premium for their product compared to going through another supply chain actor. Cooperative Coffees, for example, has members from popular Midwest roasters such as Peace Coffee, Higher Grounds and Kickapoo Coffee.”
West Monroe anticipates a “double down” on this model working in the short term for survival but expect it to have long term ramifications as these industries seek to weather this contractionary period and work to rebalance.
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Shipping Increases Reliance on Technology
“In the past few months, as consumers stocked up on goods, workers across the supply chain, particularly truck drivers, became essential personnel in the COVID-19 narrative. They were, and continue to be, responsible for keeping store shelves stocked and delivering online orders — on schedule,” said Yamini Vellore, CIO of Blume Global. “Truck drivers also deliver medicine and PPE that are crucial to the health and safety of healthcare professionals and patients.”
This increased pressure on the supply chain and the transportation of goods has illustrated the complexities of the supply chain and how much it relies on technology, Vellore added. When the importance of digitization in the supply chain is not prioritized, we experience delays and interruptions, and face shortages of critical items. The pandemic is forcing the acceleration of the adoption of digital solutions in the supply chain industry, which has traditionally been slow to adopt new technologies.
Two-thirds of shipping professionals said in a recent survey that they will invest in new supply chain technologies due to the crisis, Vellore said. “The supply chain industry is facing a significant inflection point, and in response, organizations need digitally empowered logistics platforms that leverage data to efficiently make informed decisions.”
Technology is also essential in making quick deliveries, Vellore added. As people reduced in-person shopping and increased online purchases, retailers and delivery workers saw demand similar to the holiday season. With this increased volume of demand, there is also increased expectation of quick delivery, something that has long been a challenge for retailers.
“There are specific technology solutions that analyze external and internal data to meet and predict consumer demands,” Vellore said. “5G enables retailers to more accurately predict potential shipping delays and use AI to optimize fleet routes based on real-time data. Leveraging this in combination with connected devices, retailers can provide customers with the 'up-to-the-second' tracking they have come both to expect and rely on.”
Manufacturers have recognized that supply chain disruptions will continue or amplify through the varying degrees of reopening in the COVID era, Nader Mikhail, CEO of Elementum said. “They are taking this opportunity to source alternate local suppliers, establish redundancy options for logistics partners, and invest in digital tools to better prepare their operations for the inevitable next wave of disruption.”