Source: RMIT Online
What are the two parameters, any company considers before making any change in its existing execution technique? Productivity & Profitability. If any change in execution can push both parameters to possibly benefitting limit, then such changes are called Optimal changes in terms of operation research.
To supply chain management systems, an asset of product-based companies, both parameters have been a nightmare. Covid-19 pandemic has given enough ground to re-think & re-adjust the supply chains following the optimization of both parameters. The layers of the lockdowns limited the global number of ports available for shipping & unshipping. Giving rise to the problem of port congestion.
For companies, this meant the un-ability to stick to their delivery commitments. This often leads to the various e-commerce or retail stores cutting down the supply of a particular product to a particular location for a while. A relatable incident you might have encountered during covid!
You might have seen a message like “CURRENTLY UNAVAILABLE”, on various e-commerce platforms. The delay of the products shoots up the prices of these products. When these products reach the end-users, their prices just double up or may go even higher. Another issue, the companies often bear through is Demand Forecasting.
During covid, the fluctuations in the purchasing habits of the consumers made it difficult to predict how much inventory to stock or manufacture at any given time. This crisis has even made it necessary to adopt data-driven technologies to counteract the problem. But is digital transformation in the supply chain so easy? Not.
On a larger note, the pandemic has demanded the global supply chain to be robust enough to smoothly sail through the unpredictable situation without puncturing the chains of supply & demand. But what is the stand of companies in safeguarding their global supply chains? Recently, many companies have adopted the policy of ‘Regionalization’.
This means setting up factories in multiple parts of the world. Decentralizing the production to multiple location production to reduce risk. Demands would be efficiently met with little pressure on the supply chain as they would be small & comparatively easy to handle. Another practice is Nearshoring, the idea is to pull production back to the country closer to the country where goods are distributed &sold.
The Italian clothing company, The United Colors Of Benetton has decided to manufacture clothes in Serbia, Tunisia & Egypt closer to where products are sold in Europe. It is a rare scenario to watch a clothing line making such a rapid change in rejecting the Asian market for production.
Although, these methods may prove to be healthy in catering to more people at precision they are expensive to pull off. The total combined cost for the USA & European market to move manufacturing out of China is expected around $1 trillion. (This data is given by Bank Of America via US-China economic & security review commission.) For small companies, such changes are too big to turn into a reality.
An article published under EY(Ernst & Young) stated, “60% of executives say that the pandemic has increased the strategic importance of supply chains.” Well, the agility, flexibility & robustness of the global supply chain have been certainly tested in the past two years since the onset of the pandemic.
Moreover, it has demanded the companies to reduce working capital by fragmentation of supply chain & learn to quickly extract cash from the chain. To stay relevant in the future, certain technical improvements need to be adopted like delivery drones or robots in packaging units. After all, thriving for automation is a legitimate goal for every demand & supply chain system, isn’t it?
Above all, the global supply chain needs to incorporate the power to respond rapidly to unprecedented situations. The leaders need to back three ideas in the supply chain at must- digitization (implementation of automation and AI), sustainability (minimizing inventory wastage), and rapid response system. Well, we can try to improve the supply chain but definitely under certain limits & certain backfires. And as we know, in the world of operation research there is no best solution!
Written By Isha Shukla
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