The impact of COVID-19 on supply chains: Part 3
This third installment of a three-part series on supply chain resiliency and COVID-19 was written by Julia Thompson and published on LinkedIn. Read it here.
- Read part one and part two.
- Long-term impacts on the industry center on the role of technology in communications and operations
- Businesses will have to adapt to evolving consumers
This article is the third of a three-part series that aims to explore the real-world, on-the-ground impacts of COVID-19 on transportation, logistics and supply chain operations.
In line with the CPCS problem-solving approach, each article is driven by a key question. For this article, that question is:
What are the potential long-term industry impacts of COVID-19?
The COVID-19 crisis has and will continue to shape the way transportation, logistics and supply chain industries operate. The crisis has underscored the necessity of resiliency planning and has forced companies to re-adjust operations. The acceleration of existing trends, such as communications technologies, automation and e-commerce, is also pushing these industries to embrace new technologies. Meanwhile, companies are turning to new partners for collaboration. Whether this can be sustained remains to be seen.
Plan for what you cannot plan for – stakeholders in the public and private sectors will independently consider disaster management in their supply chains and freight planning
While the supply chain may be quasi-resilient, it can never be totally resilient. COVID-19 has highlighted the importance of adapting to circumstances that cannot be completely anticipated. Transportation, logistics and supply chain stakeholders can apply lessons learned during this crisis – which are still evolving – to prepare for future disruptions.
Supply chains are being re-examined, torn up and improved – winning companies are product and process innovators
Transportation, logistics and supply chain stakeholders have noted a silver lining to the crisis – an opportunity to identify weak points along the supply chain and experiment to make operations more effective, efficient and resilient. Components of resilient supply chains include:
- Fewer touchpoints within the supply chain.
- Enhanced visibility and understanding of the full supply chain, and a potential shift from global sourcing to more local sourcing.
- Diversified sourcing for critical supply chains – not just at immediate links, but along the entire supply chain.
- Investment in quality data, data tools and a culture of data.
- Collaboration and data sharing to improve efficiency for partners along the supply chain.
COVID-19 has accelerated existing trends such as the growing role of technology in communications and operations
COVID-19 has both necessitated and demonstrated the importance of integrating new technologies into business communications and operations. As a result, transportation, logistics, and supply chain companies were forced to newly embrace and/or further invest in these technologies.
As detailed in part two, enhanced communication and collaboration, along with the effective use of detailed, real-time data, have proven increasingly critical to maintaining resiliency throughout the crisis. This will further drive companies to explore and prioritize investments in enabling data and technologies.
In addition, the unique nature of COVID-19 has accelerated the use of technologies that do not require human contact. For instance, the shift of work from in-person to at-home has propelled the use of video meeting technologies across sectors.
Examples specific to transportation, logistics and supply chains include:
- Reliance on contactless interaction makes way for the potential to drive paper out of supply chains. COVID-19 concerns have pushed companies to eliminate or minimize contact by reducing paper movement along the supply chain. However, some stakeholders have noted that while COVID-19 may serve as an accelerator, technological challenges – namely existing fragmentation and need for interoperability – still pose a barrier to widespread paperless practices.
- Automation and robotics at nodes (e.g., warehousing and manufacturing spaces) allow for operations at sustained capacity while still maintaining social distancing protocols – a requirement for safe operations in today’s COVID-19 world. Although medical advancements may eliminate the need for social distancing in the future, the amount of time before this happens is still unpredictable.
Expanding applications in technologies such as machine learning, Internet of Things, block chain, automation, and 3D printing, among others, offer exciting potential to further enhance transportation, logistics, and supply chain operations.
As consumers continue to evolve, so does last mile delivery
During quarantines and stay-at-home periods, consumers increasingly relied on the home delivery of essential goods, such as groceries, household supplies, and clothing. While COVID-19 demand for brick-and-mortar retail rapidly declined, e-commerce saw accelerated growth across various goods, including household essentials, apparel, home goods, and groceries. Industry leaders have even noted increased confidence in buying “big ticket” items online. As quarantine periods and COVID-19 come to pass, industry leaders remain confident that the heightened demand for e-commerce will sustain.
The following graphs illustrate the sustained growth and recent acceleration of e-commerce, based on an analysis of data from the Federal Reserve Bank of St. Louis.
As consumers evolve…
- Existing e-commerce consumers have expanded their use of online delivery to include groceries and other “big ticket” items that, prior to COVID-19, had been picked up in person. Meanwhile, new users – including those older generations – are experiencing online delivery for the first time.
- People may not to return to stores even as they reopen due to concerns about COVID-19; others will have developed a new preference for at-home delivery.
…so do businesses
- Increasing e-commerce demands create challenges for fast delivery that consumers have come to expect, particularly given capacity constraints due to COVID-19. Existing customer patience and understanding are likely temporary. Companies have been working to enhance predictability and transparency to set customer expectations and allow customers to plan ahead.
- Moving forward, we will see a hybridization of in-person and online shopping modes, such as curbside pick-up options and the potential conversion of brick-and-mortar stores into “micro-fulfillment centers.”
The need for public and private sector collaboration is at an all-time high. However, is data collaboration limited to situations of crisis?
The COVID-19 crisis has created a shift in focus, with shared interests between the public and private sector. In turn, these shared interests encourage and enable data sharing across sectors.
- FourKites, a real-time visibility platform, partnered with the New York City Economic Development Corporation (NYEDC) to monitor the food supply chain during the height of the COVID-19 crisis in the city. With customer permission, FourKites has provided data on daily shipper stops to the NYCEDC. This provided insight into how food was moving through the city, which helped the NYCEDC identify areas in need. Meanwhile, NYC set up two new temporary truck stops for drivers. The city then worked with FourKites to provide information about these rest stops to drivers in the area through FourKites’ mobile driver application.
- The MIT Humanitarian Supply Chain Lab (HSCL) has partnered with FEMA to provide evidence-based analysis on supply chains and freight flows to help inform FEMA decisions, such as where to open new warehouses.
However, industry leaders are unsure if this type of collaboration can endure beyond the crisis. Will companies fundamentally change the way they view data sharing and collaboration? Or will the core competitive advantage of data discourage this? Or will data sharing, in fact, become an integral strategy for improving supply chain efficiency and company competitiveness beyond a crisis?
The future remains highly unpredictable
Extreme disruptions have led way to the examination and reconstruction of supply chains and related operations. Data has proved more critical than ever before, and companies are increasingly leaning into collaboration where possible to adapt to a changing world – a world impacted by COVID-19. This new normal requires a global view of the supply chain, a deep understanding of data, the incorporation of resiliency and flexibility into strategic plans, and a willingness to re-adjust operations and incorporate new technologies.
Today, it seems as if the only certainty is, in fact, uncertainty. However, as transportation, logistics, and supply chain industry leaders and stakeholders share insights and apply lessons learned, companies will be better poised to navigate and respond to today’s continually changing environment.
Looking for part one and part two?
- How are companies responding to COVID-19 disruptions?