The COVID-19 pandemic has had a dramatic effect on global trade, disrupting industries, economies, and supply chains. Prolonged lockdown periods caused a supply and demand shock.
Governments, businesses, and individual consumers struggled to procure basic products and materials. Most of them were forced to confront the fragility of the modern supply chain to achieve better supply chain resilience.
Now, as the pandemic is slowly being brought under control, businesses must retool their supply chains. They should establish new backstops and inventory buffers in the face of global economic uncertainty, according to a new report.
Now, more than ever, there is an urgent need to design smarter, stronger, and more diverse supply chains. This has been one of the main lessons of this crisis.
Some things are not going to change. Consumers will continue to want low prices (especially in a recession). Firms won’t be able to charge more just because they manufacture in higher-cost home markets. In addition to the competition, the pressure to operate efficiently and use capital and manufacturing capacity frugally will remain unrelenting.
This will challenge companies to achieve better supply chain resilience without weakening their competitiveness. To do this, managers should first understand their vulnerabilities and then consider a number of steps to improve. Some of which they should have taken long before the pandemic struck.
One of the main aspects of supply chain resilience lies in having more options. Diverse sourcing and digitization are therefore key to building stronger, smarter supply chains and ensuring a lasting recovery.
Transportation and warehousing providers will also need to adjust their operations as well. They need to invest in technology to improve efficiency and ramping up to support increased demand for online shopping.
Some companies are already looking to blockchain technology and smart contracts as a way to evolve their supply chain planning function
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There are three key focus areas:
- Evolve digital to unlock data;
- Rethink the operating model;
- Build an asset-light network.
The secure, immutable nature of blockchains makes them well suited for managing upstream supply disruptions. They can support tier 1 and tier 2 suppliers while rebalancing short-term sourcing decisions in the light of supply network constraints.
Innovating gives companies time to turn their attention to the medium-term security of the supply base. They can unlock funds intelligently, and building supply chain resilience in the long term.
Blockchain technology has received attention from both practitioners and academics not just because of the soaring value of bitcoin and frenzy over cryptocurrency.
Its inherent qualities of greater trust, transparency, data collaboration, customer centricity, and scalability make blockchain ideal technology for supply chains.
The opportunity is to mitigate risks associated with intermediaries’ interventions, reduce hacking and improve transparency.
Blockchain and smart contracts can support supply shains to be less vulnerable to operational and political turmoil, implement by design operational and regulatory compliance, and avoid contractual disputes.Luigi Telesca, Trakti CEO
Organizations that leverage blockchain technology to enhance supply chain resilience in times of increased risks and uncertainty can update their risk management strategies to ensure purpose-led procurement decisions.