The COVID-19 virus has brought humanity, as we have come to know it, to its knees. Where kindness, sharing and caring once prevailed, now self-preservation reigns in shopping malls throughout the world as the “have’s” stockpile their larders with vitals at the expense of the poor, the needy, the aged and the sick. Shopping trolleys are filled to the brim not because there is a dire and urgent need to satisfy physiological needs but rather the wanton greed to plunder shopping shelves without giving any consideration for the shoppers in the queues behind them. Imagine if the world did not have an effective and efficiently run supply chain to constantly channel food, fuel and other essentials to replace those that have been exhausted because of the “feeding frenzy” of the uncaring and those who have sufficient funds to purchase what and when they like and the transport to procure such offerings. There would be further chaos, indescribable misery, an uncontrolled mortality rate and above all a world economic recession that would surpass the 1929 financial crash!
Historically, Supply Chain Management (SCM) has been likened to a philosophy… a concept rather than an essential service. As a relatively new mindset, it incorporates thirteen logistics activities and business processes to ensure cohesion amongst supply chain members and a continued flow of products, information and money. Wars have been won and lost by the implementation and control of either effective and efficient Supply Chain Management or the lack of using it to its full potential as was experienced during the Napoleonic Wars and WW2. There is little doubt that the world post-COVID-19 virus will be decidedly different to life as we have come to know prior to this adverse scourge befalling us. Therefore SCM will not be considered merely a concept but rather a life-saving essential service that will be used for the cohesion of all supply chains so that they may work in concert with one another in order to satiate the needs and wants of people and businesses at all times, including times of crises.
Besides the challenges brought upon us by the current pandemic, what other challenges are looming in the years ahead? Some of the key issues (certainly not all) are:
- Technology (automation, robotics and the 4th Industrial Revolution). According to Klaus Schwab, the Founder and Executive Chairman of the World Economic Forum (2017), the 4th Industrial Revolution is characterized by “… new technology fusing the physical, digital and biological worlds, thereby impacting on all disciplines”. With the ease of new entrants into the market and capturing it (it took Facebook 6 years to generate $1billion and Google 5 years), new entrants will generate more products, which will need to be warehoused, transported and distributed. This will add an immense amount of pressure on existing global and national supply chains, thereby necessitating a SCM revolution that will be able to cope with such metamorphosis;
- Pressure on the reduction of costs and the increased desire for quality. Herein lies the greatest paradox of all as consumers and business customers demand low prices for products and services, yet insist on increased quality. With the ever-escalating price of fuel, vehicles and running costs, supply chain members are going to have to seek ways to maintain and if possible, decrease their cost. This could be achieved by vertical integration, horizontal integration (by buying competitors to enjoy economies of scale) and the use of fuel-efficient and sustainable vehicles and even self-propelled trucks (already being used) to reduce labour and associated costs;
- Globalisation and the effective and efficient management of the elongated and complex supply network. Lengthy supply chains are fraught with risk and uncertainty, especially in this turbulent and uncertain world we all currently reside in. Here risk management is going to play an important role in identifying and mitigating risks (supplier risks, supply risks and interest rate risks etc.) so that global business may operate under an umbrella of relative certainty;
- Shorter lead time as a result of consumer demand and rapid changes in consumer behaviour. There is no doubt that we live in a world for the need of instant gratification. What we see today is what we buy today, especially as a result of consumers having access to virtually unlimited credit. We therefore buy what we want even though we cannot afford it. The rapid changes that are taking place in consumer behaviour as a result of AI’s impact on the generic consumer behaviour process (desire for products and services are created and not identified as per the process) are also fueling the need for a more agile, responsive, sustainable, customer-centric and cost-efficient supply chains. Where once agility was sufficient to satisfy needs, how much quicker must organisations produce and distribute goods so that they may arrive at the Right place, to the Right person, in the Right condition, at the Right time and at the Right price?
- Effective inventory and throughput management in a global context. With a world exploding with over-population and the need for finished goods and services, the question is how much inventory should an organisation carry? It is a well-known fact that carrying too much inventory incurs additional carrying costs whilst carrying an insufficient quantity increases the likelihood of retail outages and escalated order costs. With most forecasting being historically inaccurate, how can organisations prophesize future demand so that capacity can be managed to meet such demand? Some pundits see the solution to be JIT production and distribution whilst other see the answer to be further collaboration and integration, increased information sharing and joint demand forecasting amongst all players in the supply chain. Whatever the solution may be, throughput management needs to be “managed” so that the Rights that are reflected above may be realised otherwise customers will migrate to competitors that can offer quicker response times and miniscule outages; and
- Build ‘robustness’. A robust supply chain is one that can withstand ‘shocks’, such as the current disruption caused by the COVID-19 pandemic. In their search for continuous improvement and reduction of costs, what the acclaimed writer Margaret Heffernan calls ‘the myth of infinite efficiency’, supply chains that have adopted Lean or JIT methodologies now find they lack robustness. They have no ‘extra’, there is no slack that can be used to mitigate the effects of the unexpected. This essential characteristic has been driven out by the persistent downward pressure on costs. These businesses operate on razor-thin margins (of time, of money, and of resources generally) and their supply chains are not robust – they are very exposed to disruption. Supply chains need to build robustness by balancing cost-efficiency with flexibility and resilience. They need to develop stronger relationships with other chain members instead of focusing on extracting the lowest prices from them. The future is becoming more difficult to predict and forecasting less effective. Disruptions and unforeseen events are inevitable. Supply chains have become longer and more complex. Unless they gain robustness, these supply chains will not be ‘fit’ enough to mitigate the risk of crippling disruptions.
The industries that are most at risk are:
- The transport industry as it will be faced with ensuring that the above Rs are implemented and controlled. As a result of AI, it is estimated that by 2025 thousands of motorcars and trucks will be driverless. The negatives from a trucking perspective includes job losses, less ownership and the possibility of hacking and cyber-attacks. In the summer of 2015 (the year Tesla was launched), two hackers demonstrated their ability to hack a moving car; controlling its dashboard functions, steering, brakes etc. all via the vehicle’s entertainment system (Schwab, 2017). It is believed that all modes of transport (especially road) will be faced with shorter lead times, which will certainly burden transportation and the rest of the logistics functions;
- Manufacturing as it depends on raw materials, components and spare parts to produce goods and services via the transformation process. As markets expand exponentially and as 3D printing becomes more of a reality than a rarity, product design and production could be performed at a consumer’s home. Eventually it could even become an office or even a home appliance. If this is the case then the demand for logistics services such as transportation, warehousing and demand management could even decrease in line with the reduction in production; and
- The services industry. It is estimated that 85% of all jobs in the USA are service oriented. As there is such a wide spectrum of service providers ranging from hotels, hairdressers, hospitals etc., the growth of services and service providers will increase exponentially with an associated decline in manufacturing (as a result of 3D, robotics, and outsourcing etc.), This will put a burden on the supply chain as it will have to keep up with such growth in the service industry.