As the world transitions into a post-pandemic recovery period, global manufacturers and supply chain professionals will likely need to continue to prepare for further volatility as countries attempt to stem the spread of the pandemic,” maintains a new report from Resilience360
Mirko Woitzik, Manager EMEA, Intelligence Solutions at Resilience360 adds that the highly disruptive stop-start nature of COVID-19 related restrictions is almost certainty likely to persist as governments and companies worldwide prepare for the distribution of COVID-19 vaccines that can help alleviate some of the “pains.”
Resilience360 launched a survey from September 28 to October 14, 2020 to more than 10,000 shippers across the world, and received responses from supply chain professionals spanning across multiple sectors and regions on the impacts that the COVID-19 pandemic has had on their supply chain operations.
These companies are active in the technology, engineering and manufacturing, pharmaceuticals, aerospace, chemicals, consumer goods and automotive industries.
• The survey was initiated to understand what actions companies are taking to mitigate operational disruptions – from the use of emergency air cargo to stockpiling and alternative modes of transportation – and which strategic trends are starting to emerge, both in the logistics and procurement areas, amid the persistent uncertainty that is likely to continue throughout 2021. The survey has taken a particularly close look at how companies are adapting and optimizing their supply chains by exploring alternative logistics routes or shifting their sourcing operations to alternative markets to minimize the risk of disruption.
“The underlying uncertainty posed by the COVID-19 crisis serves as an ominous reminder of the persistent supply chain challenges that will likely remain for years to come in what is becoming ‘the new normal.’ As global supply chains become increasingly fractured, global companies and suppliers will need to develop agile and responsive supply chain measures to guard against one of the greatest worldwide disruptions experienced in a generation,” says Woitzik
• More than 98 percent of respondents said that COVID-19 has affected them to some degree, highlighting the profoundly disruptive impact of the pandemic on global supply chains and underlining its uniqueness, compared to past disasters such as the Fukushima earthquake, with supply chain disruptions not being confined to a particular location or a type of component.
• When asked to name the most significant short-term challenges in the next 3-6 months, all respondents expressed that, first and foremost, demand shocks and surges would remain the most significant challenge. This was followed by supply shortages for critical materials and/or components (97 percent) and cargo capacity shortages (90 percent), which respondents said would very likely also remain a considerable risk in the coming months.
• Almost two-thirds of all participants (63.1 percent) mainly struggled with air freight capacity shortages and flight disruptions, illustrating the exceptional impact of COVID-19 on air cargo supply chains. In a bid to keep supply chains running, companies responded to this disruption by paying premium air cargo rates (37.4 percent) to have critical shipments uplifted from origin points amid the collapse in international air travel.
• When asked to name an alternative mode of transportation organizations would continue to use even after the pandemic, the most frequent answer was ocean cargo services instead of air cargo (24.1 percent), indicating that while most companies were primarily focused on using air cargo to keep supply chains running in 2020, a large share also plans to shift away more transportation to ocean cargo services in the future. In fact, most companies that chose to consider using more ocean cargo services instead of air came from the LSHC sector (23.4 percent).
• When it comes to moving sourcing/manufacturing out of China, over a quarter (26.5 percent) stated that they were planning to either shift all (1.8 percent) or some sourcing/manufacturing to another country (24.7 percent). However, 34.7 percent of respondents stated that they had no intention of shifting sourcing out of China.
• For those who indicated that they were planning to shift sourcing out of China, 11.8 percent stated that they were in the preliminary stages while another 8.8 percent were either discussing or planning to shift supply chains out of China. Over two-thirds of respondents (66.5 percent) indicated the question as not applicable to their situation — which may suggest that many companies not seriously acting upon or planning to facilitate major manufacturing shifts at this time.
• In terms of the reasons behind why organizations were planning to shift supply chains elsewhere, 31.3 percent cited the need for greater supply chain diversification while 17.9 percent pointed to the need to reduce reliance on China for sourcing essential materials. In addition, 15.9 percent of respondents also pointed to tariffs and other trade-war related disruptions as another factor for shifting sourcing/manufacturing elsewhere.
• Over half of the respondents (51.3 percent) stated that they believed that their company would be facing declining revenues in light of COVID-19, with 22.1 percent expecting a decrease of 5-10 percent and 17.9 percent anticipating a decrease of 10 percent or greater. This comes in contrast to only 12.2 percent of respondents that believed that their annual revenues would increase by 5 percent or more (8.7 percent) or 1-5 percent (3.6 percent).
• As for near-term measures organizations were planning to take over the next 6-12 months, 56.9 percent claimed that they would apply more active supply chain risk management processes; 51.3 percent stated their organization would explore alternative logistics and delivery routes; and 40.5 percent stated that they would invest in technologies aimed at improving supply chain risk monitoring.
About the Author
Patrick Burnson, Executive Editor
Mr. Burnson is a widely-published writer and editor specializing in international trade, global logistics, and supply chain management. He is based in San Francisco, where he provides a Pacific Rim perspective on industry trends and forecasts. He may be reached at his downtown office: [email protected]
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