Pandemic Exposes Weakness Of Lean Supply Chains: It’s Not Too Late To Fix

Article written by Susan Galer

If companies ever needed real-time insights into alternative sources across their supply chains, now is it. COVID-19 is like nothing humanity has ever seen, and leaders are stepping up to protect their business and prepare for a very different world. Here’s a summary of what supply chain and geopolitical experts shared during a timely session of the virtual SAP Ariba Live 2020 event, spotlighting steps companies can take right now and for the future.

Develop worst-case sourcing plans

While running lean is sacred to modern supply chain management, the pandemic challenges long-held efficiency norms, in some cases, with life-threatening consequences. Ian Bremmer, president and founder of Eurasia Group and GZERO Media, saw COVID-19 as the ultimate stress test.

“Sophisticated companies know exactly where every piece [is located] and don’t need to overstock…they’re incredibly lean and incredibly efficient,” he said. “This [pandemic] tells you that actually you need to have a lot more ‘what if’ capacity, not just-in-time, but just in case supply chains. We don’t have many companies that have done a lot of work around that.”

Bremmer, who intertwined the impact of COVID-19 with geopolitical risks, called on companies to rethink sourcing strategies in a “radically different” environment. Sean Thompson, executive vice president, Network & Ecosystem SAP Procurement Solutions, said this was why the company opened up access to SAP Ariba Discovery, “to help companies find alternative sources of supply.”

Prepare for geopolitical risks

According to Bremmer, the danger businesses face is not just because COVID-19 happened; it’s because it’s happened at this moment in history. I don’t have sufficient space to detail his perspectives here, except to say that he inextricably linked the impact of the pandemic to geopolitical dynamics. The wide-ranging conversation included his thoughts on the blended, and very much globalized business and political outlook of countries like the United States, China, and India. He also shared his views on the emergence of a fundamentally changed world power order. Overall, he predicted more trade disputes as supply chains localize further, and zero-sum strategies became the norm.

“Countries are increasingly going to have to decide who they’re aligned with, and that’s going to be challenging for many countries in the world that would much rather have a foot in both systems,” he said.

Power in collaboration

Even as he acknowledged the fast-changing challenges COVID-19 posed worldwide, Bremmer was optimistic about the private sector’s ability to alter the path of the threat.

“We’ll do it not just because of our government, but because of the private sector, our CEOs…because our entrepreneurs are among the strongest in the world and they will row together,” he said.

Speaking during another virtual session, Bremmer also praised the “robust” and “extraordinary cross-border function” collaborative response of organizations outside of government.

“Suddenly we’re going to get this kind of response from outside the federal government, which does have the ability to move very quickly. It’s responding to the coronavirus in the universities, researchers, as well as the private sector…to get data out, medicines that respond to coronavirus, build a vaccine…in a way like nothing humanity has ever seen,” he said. “The response function of the world’s talent pool, human capital, is actually only becoming more global, and that truly is something to bank on moving forward.”

We’ve been talking about real-time for a while, but it’s taken on a whole new meaning in a world rocked by COVID-19. Supply chain efficiency will be among the thousands of business practices redefined by a pandemic that promises to leave no business norm unscathed. Organizations can and will fix this for the better.

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