COVID-19: virtually all supply chains have been impacted to some degree

Prior to the coronavirus outbreak, 77% of supply chain executives thought they were at least somewhat prepared to face a major supply chain disruption. However, the majority of supply chains have suffered a 25% or greater reduction in operations due to the COVID-19 pandemic, and virtually all supply chains have been impacted to some degree. These findings come from the 2020 COVID-19 Supply Chain Impact Survey, which was conducted by the Infosys Consulting Supply Chain Management practice. The report identifies a number of areas within the supply chain that need significant strengthening to mitigate future disruptions.

In order to better understand how the COVID-19 pandemic has impacted supply chains in the global economy, Infosys Consulting conducted a survey among 78 professionals worldwide, of whom 42% are at VP level or above and 30% are working in companies with more than US$ 20 billion in annual sales. The survey investigated the impact, recovery, preparedness and improvement areas related to the coronavirus outbreak.

Impact and recovery of COVID-19

According to the report, the impact that COVID-19 has had on many supply chains in the global economy cannot be overstated. The findings suggest that virtually all supply chains have been impacted to some degree, and 57% of the respondents indicate that they have suffered at least a 25% reduction in supply chain operations. In terms of recovery, the respondents are generally optimistic; roughly 60% believe that recovery will take less than six months, just 10% believe it will take longer than 12 months, and only 8% believe that their supply chains may never recover to pre-COVID levels. Despite this optimism, the road to recovery presents numerous challenges, including communication, transparency and reestablishing links collaboration with key supply chain partners, many of which have also been heavily impacted by shutdowns and delays.

Before and after

The survey’s ‘before and after’ assessment of the respondents’ preparedness to face major disruptions reveals that supply chain organizations may have been overconfident about their readiness. 77% of the respondents believed that their supply chains were at least somewhat prepared for a major disruption before COVID-19, but after the pandemic had started this fell to only 39%. The authors of the study conclude that this is because traditional preparedness was focused on single events – such as a natural disaster, a port closure, a facility shutdown – and created plans to divert to alternative locations for short durations, whereas the coronavirus outbreak triggered a multi-facility, multi-country shutdown.

Improvements

When the executives were asked to reflect on their company’s performance during the pandemic and identify the changes needed to strengthen their supply chain against future disruption, the top three responses were Demand Forecasting (43%), Readiness & Continuity Planning (39%) and Inventory Management (39%). Infosys Consulting describes the readiness gap as making “a compelling case for tools and technology that allows companies to simulate major disruptions within their supply chain networks to identify potential weaknesses and develop contingency plans. Advanced planning tools can help supply chain executives create comprehensive readiness plans that prepare companies for major supply chain disruption like the one we faced during this pandemic.”

The report emphasizes that it is also important for organizations to actively manage supplier risk. This includes evaluating supplier performance, assessing their readiness plans, working with them to achieve mutually beneficial improvements, and creating contingency plans in case of supplier shutdowns.

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