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After Covid-19, Supply Chains Are at the Heart of Company Strategy

After Covid-19, Supply Chains Are at the Heart of Company Strategy

Covid-19 has forced companies to bring supply chains to the front and centre of their strategy. Going forward, successful firms will be those with strong supply chains.

Illustration by Raj Verma Illustration by Raj Verma

The world around us changed rapidly, and drastically, with the sudden spread of Covid-19 in March 2020. To call it a Black Swan event would be an understatement. During the lockdowns, it was not just brands competing with each other to reach consumer households. It was more a battle between their supply chains. The brands that won the race, won it on the back of the success of their well-oiled supply chains.

Covid-19 has forced many companies, and in fact the entire industry, to rethink and transform their supply chain model. The focus over the past two years has been on creating systems and processes that help the supply chain—regarded as the backbone of any organisation—have the ability and the flexibility to absorb such disruptions and shocks.

As companies looked at developing supply chain strategies to gain a sustainable competitive advantage, the key pillars on which these strategies were built were: agility, resilience, collaboration and networking with customers, suppliers and other stakeholders. As they continued on this path, higher investments were made in supply chain technologies. This is contrary to the traditional industry practice of firms slowing down technology investments to a trickle in a volatile and uncertain economic environment.

Digital Transformation

The birth of e-commerce in India a few years ago added a completely new dimension to the way of doing business. While e-commerce had been growing at a steady pace, the pandemic accelerated this. In the post-Covid-19 world, e-commerce has emerged as the most-preferred contactless method of making purchases among consumers. And this trend is likely to stay. This has put the focus on the importance of customer delivery experience, which encompasses everything from speed and accuracy to real-time traceability and quality of on-time delivery. These are today crucial for consumer satisfaction.

Having tasted success with e-commerce, a growing number of companies are now experimenting with newer models of delivery like D2C (direct-to-consumer) and D2R (direct-to-retail). These models will gain importance in the next 3-5 years and will only contribute to incremental growth for organisations. These models give organisations greater control over the delivery mechanism, thereby reducing the impact that disruptions such as Covid-19 would have on traditional brick-and-mortar channels, besides allowing businesses greater control over the delivery experience they want to give their consumer. That’s where digitisation has become imperative. It is today a must for ensuring cost-effective and agile supply chain management.

Over the past two years, the traditional linear supply chain has witnessed a digital transformation, leveraging advanced technologies to focus on end-to-end visibility, agility and optimisation, and be better prepared to deal with the unexpected.

Digitisation of supply chains or creation of digital supply networks will gather pace going forward as firms look to address the new and emerging requirements of their customers without losing focus on ERA (efficiency, resilience and agility). End-to-end digitisation from demand to supply planning, from procurement to manufacturing and logistics, would become commonplace. This will help integrate processes, increase operational transparency, improve visibility and make them more efficient.

Agility in supply chain is also acquiring a new form with companies realigning their strategies to meet the changes in global trade flows, emergence of new trade agreements, country incentives, etc. A successful supply chain operating model of the future will be one that can periodically review what work should get done locally, regionally and globally, including warehouses and manufacturing sites. While there may be considerable tax implications here, such a model will keep the organisation ready for any future disruptions. There is also growing focus within businesses on retraining and reskilling the workforce to ensure that they adopt digital and adapt to new ways of working.

Adding the ESG Focus

ESG-focussed business strategies are no longer a feel-good concept. They are emerging as a necessity for every aspect of business. Millennials want to work for companies with sustainability built into their mission statements; consumers are increasingly seeking products that are environment-friendly; and governments are enacting regulations and compliance requirements that are pushing firms to focus on ESG issues as a business strategy.

Supply chain transformation is going to be central to the sustainability targets being set by firms in the years ahead. We would increasingly see enterprises sharpen their focus on creating a more sustainable business by addressing the environmental, social and corporate governance concerns, and managing the ESG impact across their supply chain. That would, in the process, unlock the opportunities that this sustainable supply chain brings.

Supply chains have the tendency to expose firms to hidden and uncontrollable risks that can negatively impact their ESG scores. Since managing vendors and other third parties in the supply chain will not only be important but also tricky for firms, there is a crucial need for developing and implementing metrics to assess the ESG practices of suppliers, contractors and vendors. Effectively integrating ESG goals into supply chain operations would also require frequent communication with all third-party partners.

Sustainable sourcing would be the cornerstone of any approach to drive sustainability throughout the supply chain, covering all partners. Technologies such as blockchain and AI can be explored to improve visibility and traceability of supply chains, and ensure that partners operate fairly and ethically. Companies must also work with suppliers and business associates to reduce GHG emissions.

Going forward, the most successful firms will be those that embed ESG throughout their supply chains, working with suppliers to find solutions that meet both business needs and the greater good.

Published on: Feb 15, 2022, 9:17 PM IST
Posted by: Vivek Dubey, Feb 15, 2022, 8:29 PM IST