The Coronavirus pandemic has undoubtedly transformed our way of living, working, and consuming, and we have yet to discover its full impact. Already, most renowned supply chain specialists have drawn the list of the potential changes:
1. From globalization to regionalization
Especially in the industrial sector, the keyword was optimization and cost reduction, which ultimately meant sourcing from low labor cost countries. As soon as China closed their borders with the rest of the World, many companies had to rethink their strategy.
Taking an example from one of our clients: Alstom decided to diversify their supply sources to European countries, which, even with the cost increase, will reduce the risk of shortages.
Another example from France, regarding mask production. Most masks were first purchased from Asian countries, but, as the pandemic grew, the production got moved back to the homeland.
3. Human dimension: the comeback
We could have thought that, due to social distancing, the Human factor in this "optimization operation" would be discarded, but researchers tend to think differently. Labor will be one of the key assets to play with to get out of this crisis: from a wide range of industries and even with the improvement in AI technologies, this "human touch" will be what makes the difference. TPS (Toyota Production System) calls this "human touch" the "autonomation," which has been proven to be very effective during the crisis: 80% of automating and 20% of improving from human expertise. Many companies noticed a shift in communication and change management: younger employees helped older ones with using information systems, more contact with our "professional entourage"…
4. Forecasting in the COVID era
Every day, companies use forecasts to plan their activities, communicate with external stakeholders and prepare them so that supply chain activities can happen on time at the right quantity and quality. Forecasts allow resources like people and money to be allocated in a schedule that can be smoothed. Forecast accuracy comes to measure the reliability of the communicated data as demand can be very variable. When forecasts are accurate, planning activities are made easier, as well as resource allocation. On the other side, when forecasts are not accurate, they can generate many uncertainty and disruptions among the supply chains. In this case, stakeholders are less likely to trust each other, overstocks are generated, and emergencies tend to happen and create stress. Demand variability is nowadays high with the pandemic situation, and forecasts tend to be inaccurate. Stakeholders are impacted by production stops and closing factories, increasing the stress all along the supply chain.
This sums it up: the COVID 19 pandemic has shown us the limits of our established systems. It has drastically changed how we perceive the supply chain through local sourcing to putting back the "human factor" as the key characteristic of the optimization equation.
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