COVID-19 and supply chain: lessons learned and how to plan for a better future in 2021

COVID-19 is not any longer a new word for anyone and will be remembered for many years to come. In the very beginning of this year, the news began to spread that a deadly virus had hit China. Yet, by that time, the rest of the world was still developing and in full motion. Businesses, not to mention supply chains, continued to run smoothly and with a promising future ahead. As China was the first country to get to experience the consequences of COVID-19 as well as the first one to take actions in preventing the virus from spreading, supply chain disruptions began shortly to be encountered by companies around the world. It is widely known that many goods are being sourced from different parts of China, be they finished goods or industrial products used in manufacturing plants in different markets around the globe. 

By means of these, companies outsourcing from China were put in the position to decide, at very short notice, which production was feasible and what orders could be made on account of the constraints at hand. Yet, COVID-19 continued its spread across the world. Already by the end of February, other countries in Europe, Asia and the USA affirmed cases of COVID-19 and even deaths. On the 11th of March 2020, COVID-19 was asserted as a pandemic by the World Health Organization. From that date on, COVID-19 continued to spread drastically, leaving many people out of work and businesses that were once very successful met with failures while some even had to close-down. People in every corner of the globe got to live with the virus and change their lives accordingly.

COVID-19 impact on Supply Chains

Up to this day, there are over 70 million confirmed cases of COVID-19 in over 190 countries and more than 1.6 million deaths. By the time the virus has spread globally, the World Health Organization advised countries to impose measures that can slow the spread of the virus. Among the most common strict measures aimed at flattening the curve are travel restrictions, downsizing of social gatherings and business activities, and limiting face-to-face contacts. Nevertheless, some countries refused to adopt very strict preventive actions and have hence imposed less strict measures in hope that the economy will continue to rise. As such, these different international responses to COVID-19 have had a significant impact on supply chains everywhere on the globe. Perhaps until some months ago, on the list of supply chain risks, pandemics were completely out of any organization’s risk assessment. Natural disasters or cyberattacks are yet some of the risks companies might have worked against until the COVID-19 pandemic set in.

Since the beginning of 2020, a huge uncertainty throughout the global economy has been created and with it, new supply chain challenges are coming to the fore now. As such, among the significant issues brought by COVID-19 to the supply chain, we can count: 

  • Restrain on materials and components to continue manufacturing,

  • Supplier bankruptcy, 

  • Global transportation – avoiding countries and city lockdowns, 

  • Ensuring labor availability along the supply chain especially in countries in lockdown and quarantine regulations, 

  • Inaccurate forecast – changing demand caused by panic buying, dampen demand due to social distancing, 

  • Lean inventories unable to buffer increased lead times,

  • Inadequacy in ensuring sufficient cash and liquidity in the supply chain,

  • Determine priority of products and components that are under restricted capacity, 

  • Need to find suppliers better geographically located due to import/export restrictions.

As this year comes to an end, it is time we admit that the world is becoming increasingly uncertain. COVID-19 has changed a lot the way we live. Companies no longer operate in a safe and stable environment, and disasters are very prone to happen. The fact is that the world has encountered more shocks than ever before and the future becomes hence even hazier. Even though over the past 25 years supply chains have thrived and evolved to extraordinary complex global networks, it is yet important to recognize that there has been zero real thought about what could go wrong along the way. As discovered by HubSpot, only 44% of companies have only 1 solution for monitoring the supply chain. This year, companies just about everywhere have been exposed to vulnerabilities in both their production strategies and supply chains. 

HubSpot COVID resilience report

COVID-19 pandemic has also proved to be an absolute test of corporate values and principles. At this time, any company is very likely to run into issues with different stakeholders given their ability to judge the company’s responses to the crisis both internally and externally. Throughout this year, companies have gone through different shocks. Some of them had a direct impact while others created an ocean of skepticism, uncertainty, and losses that will undoubtedly have a long-term impact on both the financial and operational sides of the business. Given these, businesses must rapidly maneuver the challenges of COVID-19 while devoting their efforts to addressing the needs of their customers, people, and suppliers. Already, companies have started to take action to increase resilience against future potential disruptions to their global supply chains. 

HubSpot COVID resilience report

By taking the right actions, 2021 can become much more profitable and massive complexity, including also supply chain disruptions, can be turned into meaningful changes. Hence, it is now time companies already start preparing for 2021 by acknowledging the following trends.

5 trends in the supply chain to look out for in 2021

  1. More agility

It is well known that flexibility and agility in supply chains have always played an important role. Yet, this is even more so the case in today’s unpredictable business environment. To name just a few, perpetual change, shorter product life cycle, and increased demand uncertainty are some of the conditions that have become the new norm. As such, by being more flexible and agile, companies can react to changes within the shorter notice. Moreover, an agile supply chain can also help maneuver scarcity and disruption. 

Yet, the first thing to consider when trying to respond to any changes, it is to firstly identify the changes. That is, establishing a high level of alertness should be the first dimension companies ought to address. This dimension implies that companies must be able to sense emerging market trends while continuing to listen to their customers and facilitating a collaborative relationship with their suppliers. Most importantly, this first dimension calls upon demand control, the anticipation of forthcoming disruption events, be they natural or man-made disasters. Once this first dimension is completed, companies must be able to rapidly access relevant data in order to quickly decide how to act. Information access across the supply chain is a key requirement for supply chain agility. However, for a business to succeed, it is important to also foster the ability to make strong-willed decisions on how to respond to the identified changes. In fact, swiftness is at the very core of supply chain agility. That is, agility is dependent on a company’s ability to implement decisions promptly. Yet, without flexibility, a company might find it hard to modify its range of tactics and operations to the extent needed to implement its strategy. 

  1. Adopting blockchain technology 

Blockchain technology in the supply chain comes in handy in a period of increased uncertainty, disruptions, and risks. Blockchain technology helps distribute digital data transparently and securely by means of tracing the entire history of each asset from the moment of production until it is being put in use. As such, by delivering the data that is needed in real-time, blockchain helps companies to look for process inefficiencies, equipment inefficiencies or other incidents along the way. Blockchain helps create a more decentralized network given that all parties in the supply chain have access to the same data, connecting in this way suppliers, distributors, manufacturers, and retailers in a single ecosystem with cryptographic keys protecting every piece of data. Moreover, blockchain produces a more trusted environment, in that it keeps a long-lasting record of all supply chain histories, ensuring tamper-proof digital document trails while also building trust among all network participants. Most importantly, by using blockchain in signing contracts, intermediaries can be removed, hence making supply chain management more cost-efficient. 

  1. Omnichannel is the new normal 

As supply chains continue to develop and mature there has been a move toward more intense collaboration between customers and suppliers. Omnichannel customer service is the solution for forward-thinking businesses. To be able to retain customers, omnichannel customer support gives companies the opportunity to serve customers in a variety of ways that are not only convenient and effective but also have a beneficial impact on boosting companies’ brand image and credibility. Omnichannel customer service entails providing customers with a direct and convenient shopping experience, regardless if they are shopping online or in-store. It means, in fact, that supply chain leaders and stakeholders must increase proficiency across all channels while engaging with customers and personalizing the shopping experience. Among the benefits of this approach are end-to-end visibility, better control over KPIs, better risk management strategies, reduced situations of overstocking/ understocking, etc. 

  1. IoT and Big Data

IoT and Big Data are nowadays incorporated into our daily lives. This is, even more, the case in supply chain management where the number of devices connected to the internet is increasing at a fast velocity. IoT is continuously generating a vast amount of data, and, in today’s risky environment, well-analyzed data is extremely treasured. As such, Big Data analytics tools have the capability to deal with large volumes of data that is being generated from any IoT device. Whereas IoT delivers the data collected from various sensors, the Big Data analytics tools can be used to the extent of storing and creating insights from this information. As a result, IoT and Big Data together, assist businesses as well as other organizations to achieve an enhanced understanding of data, and hence, making efficient and knowledgeable decisions, including also benefits for every business segment and industry. 

Also, Big Data application in the supply chain improves operations, hiring processes or even marketing strategies. As such, IoT and Big Data analytics can help businesses to go from being reactive to being proactive which is one of the right ways to manage risks. Some of the advantages of IoT and Big Data to the supply chains are: it helps manufacturing companies to have an in-depth look at how the overall business is performing while enabling them to find out as well as repair damaged equipment before much damage is produced; the behavior of many industrial devices can be easily controlled; improvement of organizational productivity, etc.

  1. Automation 

Automation is a game-changer in the supply chain. Today, in the digital age, businesses ought to optimize their workflows in order to maintain a competitive advantage. Supply chain automation simply enables companies to do just that. Namely, automation can, for instance, take over dull, dirty, and dangerous tasks from humans. As such, labor-intensive tasks can be performed by autonomous mobile robots allowing human capital to focus on more important decision-making. Simply put, supply chain automation refers to standardizing all of a workflow, or perhaps a part of it, to improve processes. Practically, it means utilizing technology to manage a complex web of working parts. Given the recent challenges brought forth by COVID-19, it has been proved that technology is essential for profitably implementing social distance and risk mitigation in warehousing and distribution, not to mention its importance for product realization, order fulfillment, and inventory updates or payments and invoicing. By automating the supply chain, businesses can respond faster to market changes, risks, and changing customer demands through predictive decision making.


Wrap up: 2021 Supply Chain Trends

When looking back on how 2020 has affected businesses it is interesting to note that the challenges encountered due to the COVID-19 pandemic are not over. Perhaps, more than ever before, supply chains must reevaluate their processes, channels of distribution, business partners as well as offerings. Filling the gaps that the pandemic exposed, such as minimizing risks or building resilience can help improve supply chains to better deal with any type of future disruption or disaster. Taking account of the 2021 supply chain trends and the lessons learned from this year can benefit companies in planning for a more sustainable and profitable supply chain. 

Article by Iunona-Georgiana Macavei

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