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Supply Chains Have Shifted Because of the Pandemic. Now what?

Supply Chains pandemic

The COVID-19 pandemic has altered the way companies do business.  One of the most important aspects of their operations that have undergone major transformation during the crisis is the supply chain, which refers to the network that is responsible for the seamless flow of products or services from the factory to the market.

Supply chain has evolved rapidly over the past 18 months amid the health crisis, but research and advisory company Gartner believes that its radical transformation will continue over the coming years.

In a 14-page report titled “Future of Supply Chain: 5 Changes for Supply Chain Leaders to Act on Now”, Gartner says while the COVID-19 crisis led to the supply chain transformation, more changes are in the offing. Based on responses of hundreds of supply chain leaders surveyed by Gartner, many believe that chief supply chain officers (CSCOs) should prepare for five major shifts over the next five years.

These five major shifts are supply chain digitalization, globalization and offshoring, new business models, e-commerce shift, remote and distributed teams.

First, Gartner found that 23 percent of supply chain leaders expect to have a digital ecosystem by 2025, significantly up from 1 percent at present.  This is because chief executives of companies now look at digitalization as one that will enhance business opportunities in the next decade.

Gartner says supply chain leaders should therefore take a proactive approach to supply chain digitalization by developing supply chain capabilities. Increased digitalization is expected to lead to a more resilient and agile supply chain, supported by digital technologies such as Internet of Things (IoT), digital twins and block chain.

“These technologies will digitally interconnect the supply chain ecosystem and improve network collaboration, visibility and risk management. Ecosystems that share end-to-end information in real time will enable supply chain organizations to support better and faster responses to unexpected changes in supply or demand,” according to Gartner.

The second major shift is globalization and offshoring, with 46 percent and 61 percent of supply chain leaders anticipating declines in globalization and offshore manufacturing, respectively, over the next five years.  The study predicts that half of supply chains will move production to different countries or regions and companies will invest in localized sourcing for resilience, agility and sustained growth in local markets.

Third is the rise of new business models.  According to the Gartner study, about 79 percent of supply chain leaders think that an internet-/platform-based approach is the most critical new business model to support post-pandemic recovery.

CEOs are therefore expected to take the opportunity to “reset” or rebuild their business for new realities.

Fourth is the e-commerce shift.  The study found that 69 percent of supply chain organizations expect more consumers to stop visiting stores over the next five years.  This shift actually accelerated at the start of the pandemic, when government lockdowns and concern about contracting COVID-19 led to reduced consumer traffic in stores.

Supply chain is thus seen to become a resilient and agile organization that can improve customer experience by delivering on the extremes of customer preferences. These include personalized, purpose-driven products and services delivered anywhere, at any time and in any supply condition.

“In the post-pandemic world, supply chains will collaborate with brands and product/package development teams to develop sustainable, channel-appropriate solutions,” the Gartner study says.

The fifth major shift is the organization of remote and distributed teams. Nearly all or 98 percent of supply chain leaders actually believe that working from home will further increase over the next five years. 

It is believed that supply chain organizations will have a hybrid (on-site and remote) workforce permanently in place, leading to a widespread use of productivity tracking technologies, virtual time logging and monitoring computer usage. “Physical plants, warehouses and corporate offices will continue to exist but will increasingly morph into spaces for collaboration and innovation,” the study says.

Michael Uskert, managing vice-president of Gartner, says the supply chains of tomorrow will mirror the greater purpose of their top leadership and supply chains are becoming increasingly purpose-driven.

He says purpose-driven supply chains take proactive steps to enhance environmental and community welfare.

“The pandemic highlighted the importance of supplier relationship management and being a customer of choice. Purpose-driven supply chains move beyond transactional relationships, focusing on innovation and collaboration. Being profitable is no longer enough. Organizations led through supply chains need to demonstrate purpose by showing how their actions benefit stakeholders. Forward-looking supply chains will integrate this concept into how business is done,” says Uskert.

To enable companies to sustain their operations and thrive in anticipation of the five major shifts in supply chain over the next five years, they need to become more forward-looking, adapt to changes, and take advantage of latest technologies such as cloud computing which can help transform traditional supply chains into digital supply networks.