COVID-19 has accelerated the digitalization of value chains

For me, the year 2020 will always be a turning point in history due to the outbreak of the coronavirus pandemic. COVID-19 caused a seismic shift that put supply chain management in the spotlight worldwide.

The pandemic exposed fundamental flaws in the global economy and structural vulnerabilities in supply chains. Companies discovered that agility was crucial to their short-term continuity and even long-term survival. “In the coronavirus pandemic, agility is more important than forecasting,” commented Marc Engel, Chief Supply Chain Officer at Unilever.

The pandemic has also hugely accelerated digitalization, both due to so many people being forced to work from home, and to provide the necessary – and often lacking – supply chain visibility. The speed with which companies enlisted the help of IT specialists in all shapes and sizes was impressive, and digital twins (dynamic simulation models) of entire supply chains were created within the space of just a few weeks.

Explosive e-commerce growth

The lockdowns gave e-commerce a huge boost, not least because brand manufacturers were increasingly bypassing the retail channel to supply direct to consumers. The explosive growth of e-commerce also caused severe capacity problems in last-mile distribution, plus COVID-19 created a considerable squeeze on air-freight capacity.

These major bottlenecks have made companies realize that many aspects of the business need to be done differently and also more sustainably. Before the coronavirus crisis, it was mainly the supply chain department’s responsibility for delivering on the sales promises to customers. Today, there is a much greater focus on which promises are realistic and desirable – especially when it comes to sustainability. The supply chain discipline can – and must – now play a fundamental role in the business and value creation, perhaps even more so than sales.

Thanks to COVID-19, it has become clearer than ever that effective, agile supply chains can not only save people’s lives, but are also key to the survival of companies.

Martijn Lofvers, Chief Trendwatcher Supply Chain Media
martijn.lofvers@supplychainmedia.nl