May 17, 2020

Coronavirus and the antifragile supply chain

Mikkel Hippe Brun, Co-Founder ...
5 min
The COVID-19, or coronavirus, outbreak is causing significant disruption to global supply chains.
The COVID-19, or coronavirus, outbreak is causing significant disruption to global supply chains.

According to a report from Dun & Bradstreet, 938...

The COVID-19, or coronavirus, outbreak is causing significant disruption to global supply chains.

According to a report from Dun & Bradstreet, 938 of the Fortune 1000 companies have a tier 1 or tier 2 supplier that has been affected by the virus. Tradeshift saw Chinese trade activity drop 56 percent in just a single week in February.  And we’ve heard publicly from brands like Apple, Microsoft, Nissan and JCB about the disruption they’ve felt as their factories in China closed or operated at limited capacity. 

While there are some signs that exports from China are beginning to move again, there is a growing likelihood that things will get worse before they get better. This is as the outbreak spreads around the world, resulting in labour shortages and travel restrictions which are further disrupting the supply chains of global enterprises

Different disruption, same supply chain impact

While nobody could have predicted the scale, speed, severity, or timing of the outbreak, could businesses be better prepared to deal with the consequences? This isn’t the first time they’ve faced supply chain disruption. In the last year alone, we’ve had the trade war, protests in Hong Kong, and various climate events which created unforeseen problems. 

The COVID-19 outbreak is arguably more impactful than all these events combined because it hasn’t just created hurdles, it’s completely stopped production, something many supply chains can’t absorb. But the reasons businesses are struggling to deal with the fallout are the same: supply chains are fragile. 

There are five key reasons for this:

  1. Reduced inventory levels: just-in-time manufacturing allows companies to increase efficiency and lower the cost of their supply chain, but it also leaves supply chains less resilient to sudden shocks and supply shortages.

  2. Rigid supply chains: This wouldn't be a problem if businesses operated flexible supply chains. That way they could switch order volumes to alternative suppliers in times of stress. However, very few companies don’t do this, leaving them unable to identify and connect with alternative suppliers when there are sudden shocks to their supply chain resulting in a tangible impact on production.  

  3. Manual supply chain management: A key reason that supply chains are rigid is because they’re managed manually. Making changes to orders or shifting suppliers is a lengthy and complex process and in times of stress is a luxury few companies have. 

  4. Lack of supply chain transparency: Businesses are often unaware of what’s happening across their supply chain beyond the first tier, so they’re unable to know where threats to production capacity exist. And this makes it near-impossible to proactively manage a situation like the COVID-19 outbreak.

  5. Consolidated centers of production: The globalization of supply chains has led to the development of specialist production zones—cities or countries specialize in the production of a few key products. These have helped ensure there is a plentiful supply of key supply chain components and lowered the overall cost of supply. Yet while this is beneficial when times are good, it can cause issues when there is disruption. That’s because there isn’t the capacity in other parts of the world to plug the gap in supply. 

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Solving for disruption with anti-fragile supply chains

So how can businesses better prepare for periods of supply chain disruption? I believe the solution is to build supply chains based around Nassim Nicholas Taleb’s concept of anti-fragility

There is a lot of talk about robust supply chains. Anti-fragility takes this a step further. Anti-fragile supply chains aren’t just strong, they’re malleable to ensure they continue working no matter the disruption. But, most crucially, they don’t just survive the disruption—they improve because of it.

To get there, businesses need to go digital. It sounds elementary saying this in 2020. But the fact is paper and manual process power most supply chains. And there is zero chance of building a robust supply chain, let alone one that’s anti-fragile, when buyers and sellers aren’t digitally connected. 

Making this digital connection is the foundational element for building an anti-fragile supply chain. Once this happens, all parties can benefit from increased access to data. This will illuminate what’s happening across the supply chain. Decision makers can spot single points of failure and make informed choices about how to manage any disruption. And the enhanced ability to collaborate with sellers and other parties in the supply chain ecosystem means these decisions, including finding new suppliers, can be implemented quicker, which is critical at times of stress. 

Establishing this digital foundation is also the prerequisite to applying the tools that bring the theory of an antifragile supply chain to life. Take AI, for example. It can analyse data from an array of public and proprietary sources to learn from previous periods of disruption and suggest what supply chain leaders can do to meet oncoming challenges. At the next level, it could even automatically pivot to alternative suppliers when it notices that the businesses’ regular suppliers are likely to face some disruption. 

This is what it really means to move from reactive supply chain management to proactive supply chain management. And it’s what will truly turn the supply chain into a competitive advantage for the business. 

Is it time to rethink the structure of global supply chains? 

When COVID-19 is brought under control we can all breathe a collective sigh of relief, but we mustn't be naïve about the fact that something similar will happen again. In our globalized world, the next disruption is just around the corner so it’s imperative that businesses don’t rest on their laurels.

The supply chain becomes a company’s biggest risk during times of disruption. But by making it antifragile it can become its biggest strength. 

Away from what businesses can do, there is also a question around whether global supply chains need a rethink more broadly. Are consolidated centers of production a good idea? Is there still a need for the same widget to cross the Pacific multiple times before arriving to the end consumer? And does technology create an opportunity to build an alternative, more sustainable global supply structure? 

There are no easy answers to these questions. But as businesses look at adjusting their own supply chains, it might also be worth everybody coming together to see if there is a better way to structure the global supply chain to make it antifragile as well.

By Mikkel Hippe Brun, Co-Founder & SVP, China, Tradeshift 

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Jun 21, 2021

Pandora and IBM digitise jewellery supply chain

supplychain
IBM
Pandora
omnichannel
2 min
Jewellery retailer Pandora teamed with IBM to streamline supply chains as sales of hand-finished jewellery doubled across ecommerce platforms

Pandora has overhauled its global supply chain in partnership with IBM amid an ecommerce sales boom for its hand-finished jewellery. 

The company found international success offering customisable charm bracelets and other personalised jewellery though its chain of bricks and mortar retail destinations. But in 2020, as the COVID-19 outbreak forced physical stores to close, Pandora strengthened its omnichannel operations and doubled online sales. 

A focus on customer experience included deploying IBM’s Sterling Order Management, increasing supply chain resiliency and safeguarding against disruption across the global value chain.

Pandora leverages IBM Sterling Order Management as the backbone it its omnichannel fulfilment, with Salesforce Commerce Cloud powering its ecommerce. Greater automation across its channels has boosted the jeweller’s sustainability credentials, IBM said, streamlining processes for more efficient delivery. It has also given in-store staff and virtual customer service representatives superior end-to-end visibility to better meet consumer needs. 

Jim Cruickshank, VP of Digital Development & Retail Technology, Pandora, said the digital transformation journey has brought “digital and store technology closer together and closer to the customer”, highlighting how important the customer journey remains, even during unprecedented disruption. 

"Our mission is about creating a personal experience and we've instituted massive platform changes with IBM Sterling and Salesforce to enable new digital-first capabilities that are much more individualised, localised and connected across channels and markets,” he added. 

 

Pandora’s pivot to digital 

The pandemic forced the doors closed at most of Pandora’s 2,700 retail locations. To remain competitive, it pivoted to online retail. Virtual queuing for stores and virtual product trials via augmented reality (AR) technology went someway to emulating the in-store experience and retail theatre that is the brand’s hallmark. Meanwhile digital investments in supply chain efficiency was central to delivering on consumer demand. 

“Consumer behaviour has significantly shifted and will continue to evolve with businesses needing to quickly adapt to new preferences and needs,” said Kareem Yusuf, General Manager, AI Applications and Blockchain, IBM. “To address this shift, leading retailers like Pandora rely on innovation to increase their business agility by enabling and scaling sustainable supply chain operations using AI and cloud.”

Yusuf said Pandora’s success was indicative of how to remain competitive by “finding new ways to create differentiated customer experiences that protect their enterprises from disruptions to help mitigate risk and accelerate growth”. 
 

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