Supply Chains Reimagined: Building Resiliency to Adapt to a New Reality

If you had told me a year ago that toilet paper would transform the science of supply chain management, I wouldn’t have believed you. Yet when COVID-19 hit the U.S., the public panic over tissue-free shelves became the first warning sign of a supply chain reckoning. Other failures quickly followed in the food and consumer-goods industries, and everyday Americans were suddenly seeing heated debates about supply chains and stockpiles flood their newsfeeds. Though many supply chains in North America have adapted and improved since the start of the pandemic, challenges to conventional wisdom and previous “best practices” remain. The new environment demands a transformation that brings innovation, agility, and above all, resiliency to modern supply chain management.

So what does a “resilient” supply chain look like?

A global network of Bureau Veritas supply chain specialists and auditors are on the ground answering that very question every day for clients around the world. Using a combination of cutting-edge data analysis and real-time field audits, our practitioners evaluate companies’ supply chain risk by vendor, project, geography, product category, and tier. Our procurement specialists optimize quality control across industrial supply chains, assessing the production capability, capacity, technical capability and effectiveness of suppliers to ensure they stay on schedule, on budget, and on quality, no matter where they’re located. And with our latest solution, we’re working on vaccine supply chain compliance and traceability to help create safe and speedy access to COVID-19 vaccines.

As the pandemic has ratcheted up demand for BV’s supply chain expertise, I’ve been having more frequent conversations with colleagues and clients about the supply chain of the future. It’s clear that across the region and around the world, supply chains are being redefined in some new and surprising ways. 

Flexibility is Paramount

The pandemic ground some businesses to a halt and pushed demand sky-high in others. There were key lessons to be learned at both ends of the spectrum. While auto sales plummeted and inventory sat idle with manufacturing shut down, companies in the consumer goods and retail industries were suddenly facing empty shelves and scrambling to meet spikes in demand. Their “just in time” approach just wasn’t built for a crisis.

Pre-COVID, “lean” and “agile” were almost synonymous. Post-COVID, it’s time to rethink that fundamental assumption, and start building redundancies into systems to ensure flexibility during the inevitable disruptions ahead.

In a sharp departure from just-in-time manufacturing principles, companies actually need to increase some of the raw materials they hold in inventory, creating stockpiles of critical goods. Likewise, dual-sourcing can be adopted to intentionally build redundancy into supply chains – a practice that would have been unthinkable just 18 months ago. Companies in at-risk industries are even looking beyond inventory to consider dual-sourcing of shipping options – for example, having networks of trucks and trains available in case future shut-downs impact road delivery.[1]

“Deglobalization” is Taking Center Stage

After decades of goods and labor arbitrage, companies are coming to terms with the fact that an over-reliance on off-shore suppliers can be dangerous. When manufacturers rely on one or two highly specialized suppliers for their most crucial materials, it leaves them vulnerable to supply chain disruption—especially if the supplier produces the item in only one plant or one country. We’re seeing these sourcing pattern changes start to play out within the BV client base, which spans more than 400,000 companies around the globe.

As Steve Felder, the managing director of South Asia at Maersk shared with me, “Manufacturers do not want to rely on a single source for their raw material. They’re looking at deglobalizing and nearshoring of their supplies. The last problem that anyone wants to face is essential cargo getting delayed or stuck in some part of the world while the people who need it at the destination suffer.”

As manufacturing moves on-shore or near-shore, companies are finding that changes in tariffs, automation capabilities, and innovative manufacturing techniques are working in their favor. Just as Bureau Veritas is applying new digital tools to the analysis of supply chains, forward-thinking manufacturers are starting to using robots, 3-D printing, and other innovations to create networks of smaller, geographically distributed factories that are more resistant to disruption.

Supply Chains need a Digital Makeover

Technology has been revolutionizing business long before COVID-19, but the pandemic drove home the need to accelerate digital transformation within supply chains. Understanding where the risks lie is the first step toward building a protection plan, but mapping out the full supply chain can be time-consuming and expensive. In some cases, client demand is leading the way to drive increased visibility.

Maersk, for example, innovated within their supply chain by building mobile phone traceability into their refrigerated shipments. Customers can monitor the temperature, humidity, etc. of their sensitive cargo and even get live updates on its location and movement. It’s just one powerful example of how digital capabilities can infuse resilience and risk management into every aspect of the modern supply chain.

Charting the Transformation

As with any transformation, knowing where to start is half the battle. In its assessment of supply chain weaknesses, HBR found that many companies were caught off guard by COVID-19 because they hadn’t identified and addressed their vulnerabilities.[2] At Bureau Veritas, we believe the solution is to map your supply chain to uncover the risks.

More than ever, companies need deeper insight into the status quo in order to plan and ultimately achieve a more resilient and sustainable set of practices.

Through Supply-R, our digital platform and supply chain risk management solution, we can give customers instant insight into the health of their supply chain via real-time data, displayed on a dashboard. Having total visibility can expose vulnerabilities, create transparency, and help organizations gauge disruption risks. Field audits lend critical hands-on verification of those risks, identify pain points, quantify resistance among suppliers, and provide transparency into the global disruptions to a supply chain. When companies are armed with this information as a starting point, they’re in a much better position to analyze supply chain data on a continual basis, identifying patterns and gauging their progress along the way. It’s not an overnight transformation, but it is possible to create more resilient, reliable supply chains that are better equipped to withstand the world’s inevitable disruptions.

As we pass the pandemic’s one-year milestone and look ahead in 2021, businesses are juggling a number of challenges. From my vantage point—and from the daily updates on COVID-19 vaccine distribution—it looks like supply chain management will be front and center throughout the recovery. It’s a focus that will test the resolve of leaders to unlearn some outdated lessons, reimagine how their supply chains can become more resilient, and spark new conversations about proactive management of the goods we all used to take for granted.

I’m proud to be part of a company that is helping the world’s supply of goods adapt to the changing times. Bureau Veritas will continue to be part of the conversation––as we work with our clients to rethink and shape their supply chains to respond to these new realities. 

[1] https://www.mckinsey.com/industries/travel-logistics-and-transport-infrastructure/our-insights/us-freight-after-covid-19-a-bumpy-road-to-the-next-normal

[2] https://hbr.org/2020/09/global-supply-chains-in-a-post-pandemic-world