Sep 7, 2020

WEF: Future-proofing the supply chain post-COVID-19

WEF
China
Supply Chain
covid-19
Sean Galea-Pace
3 min
Supply Chain Digital examines WEF’s report “How can we future-proof our supply chains?”
Supply Chain Digital examines WEF’s report “How can we future-proof our supply chains...

As a result of the COVID-19 pandemic, companies in all industries are seeking ways to create more resilience in their supply chains.

It is hoped that the impact of COVID-19 will reduce to a manageable level that will allow normality to return to both personal and professional lives. When this happens, the greatest long-term risk to supply chains won’t be a virus. It will be trade protectionism, which was prominent before the COVID crisis and now threatens to choke off the lifeblood as we need to speed towards recovery.

Since the beginning of the pandemic, protectionism has scaled considerably. Some emergency moves are clearly temporary and were only put in place by governments to ensure access to the medicines, machines and protective equipment required to contain or treat the virus. In other cases, the aim was to guarantee adequate food supplies for local populations.

However, these new measures have been taken against a backdrop of simmering trade tensions between the United States and China and as a result of a growing chorus of voices in the US, Germany and other countries calling to reshore, nationalise or find other sources for key products and industries.

The World Trade Organisation (WTO) has been weakened by a loss of faith in its dispute resolution system and the withdrawal of US support.

“In the current alternate universe we’re living in, global trade is collapsing and the WTO and the liberal order itself are in a true existential crisis,” Bloomberg noted in June.

As global economies emerge as a result of the pandemic, demand is expected to strengthen. As it does, trade flows, carrier schedules and inventory levels will begin to normalise and supply and demand is set to find a new standard.

However, normalisation won’t mean a return to normal. The World Bank anticipates a 5.2% contraction in global GDP in 2020. Advanced economies could shrink by as much as 7%, although they are likely to recover quicker than economies in emerging or developing countries.

Trade, which accounts for 54% to 60% of global economic activity in recent years is expected to retreat even further. The WTO expects a drop in global trade flows of 13% to 32% in 2020. 

The new age of protectionism will significantly scale the cost of goods at a time when we are experiencing historic levels of joblessness, poverty and business failures on every continent. Protectionism is expected to make supply chain resiliency harder to attain, not to mention more expensive. The first step towards resilience is diversification of sources and suppliers. For many, it means a reduction in reliance on China, which consists of 28% of global manufacturing. 

But reducing the reliance on China is not as simple as it seems. 40 years after it started modernising, China holds advantages that nowhere else has. It has unmatched scale, abundant skilled and unksilled labour, state-of-the-art automation, engineering and sciences, world-class infrastructure and logistics, closely synchronised and integrated supplier networks in country and across Asia. Leaving China would mean giving up on the world's largest consumer market and an economy increasing twice the rate of the US prior to COVID-19.

Read WEF's full report here .

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Jun 11, 2021

NTT DATA Services, Remodelling Supply Chains for Resilience

NTTDATA
supplychain
Supplychainriskmanagement
Procurement
6 min
Joey Dean, Managing Director of healthcare consulting at NTT DATA Services, shares remodelling strategies for more resilient supply chains

Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.

The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.

A Multi-Vendor Sourcing Approach

“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.

“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.

But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?

“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.

Wielding Big Tech for Better Outcomes

So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry

“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality. 

“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”

Evolving Procurement Models 

From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view. 

“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.

“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”

“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”

But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?

“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.

The Challenges

These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.

On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.

Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”

He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”

As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”

 

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