Pandemic Points to Resilience Gaps in Supply Chain

Recent pandemic-driven shortages have made it clear that mapping supply networks, reconfiguring procurement, and incorporating “disruption-related metrics” into the evaluation of suppliers are critical to building resilience into global supply chains.

“As procurement teams struggle to cope with the COVID-19 global pandemic, most have been trying to keep up with the news about global response measures and have been working diligently to secure raw materials and components and protect supply lines,” writes the Harvard Business Review. But that effort is being undermined by a reactiveness and lack of coordination that owes to the abject failure—pre-pandemic—to undertake the expensive but imperative task of supply network mapping.

The handful of companies that did invest in such mapping prior to the arrival of COVID-19 are doing much better than those that did not: With “better visibility into the structure of their supply chains,” such businesses “have a lot of information at their fingertips within minutes of a potential disruption,” reports HBR. “They know exactly which suppliers, sites, parts, and products are at risk,” and they can be “first in line to secure constrained inventory and capacity at alternate sites.”

The current pandemic is not the first crisis to upend the supply chain, and many recent hits have been climate-related. But despite the arrival of many such network-shaking events even in just the last decade—“the eruption of a volcano in Iceland, the Japanese earthquake and tsunami, Thailand floods, and Hurricanes María and Harvey,” to name a few—a recent survey showed that “most companies still found themselves unprepared for the COVID-19 pandemic,” says HBR. Of 300 respondents in a survey conducted in February, 70% said “they were still in data collection and assessment mode, manually trying to identify which of their suppliers had a site in the specific locked-down regions of China.”

Companies’ general tendency to avoid supply network mapping comes down to fears about the labour and time costs involved—for one Japanese semiconductor manufacturer, it reportedly took “a team of 100 people more than a year to map the company’s supply networks deep into the sub-tiers following the earthquake and tsunami in 2011.”

But the great need for mapping supply networks justifies the cost, says HBR. What’s more, “a new breed” of companies now exist that “can help acquire and analyze supply network data and organize the results in a user-friendly way.”

Reconfiguring procurement around revenue assurance, rather than cost savings, as well as ensuring that “disruption-related metrics” be incorporated into the evaluation of suppliers, can also help companies better prepare for unanticipated, supply chain-ravaging events.

“When selecting a supplier and writing the initial contract, many leading companies include language that requires the supplier to participate annually in its supply-chain mapping efforts,” writes HBR. With that kind of pre-emptive collaboration in place, “when force majeure events like the current pandemic strike, those supply maps can be used as a roadmap to solutions to the crisis.”