COVID-19 shutdowns have revealed more than ever the essential nature of logistics. The sector, to some extent, has been shielded from the worse impacts of this crisis. Nevertheless, like any other category of economic activity, the logistic sector is also dealing with collapsed supply chains and a treacherous road ahead. The best pathway forward must be designed according to the consequences experienced during these difficult times. With that in mind, C.H. Robinson Asia Vice President John Chen revealed what he believed to be the three most important lessons in logistics and supply chain management that operators should take to heart from this crisis. The lessons were presented in a report by T21.
The first lesson is that supply chain design must be reevaluated and adapted to more specific and flexible characteristics. Before the health crisis, supply chains had been designed according to a similar philosophy which assumed the perpetual global availability of all necessary commodities and raw materials. With that availability in mind, all supply chain logistics could focus on was optimization to reduce service costs as much as possible. Now that same optimization has to take into account operational capacities that are dynamic rather than static. Chen says international technology companies with production facilities in several nations should now consider diversifying the sourcing of components from several companies according to location, instead of working with one supplier for the sake of efficiency and lower costs.
The second lesson is that risk management must be prioritized. Chen recognizes that plenty of companies follow and even go beyond international best practices when it comes to risk management. However, he cites a study published by the Global Supply Chain Institute of the University of Tennessee which claims that only 25 percent of an average company's end-to-end supply chain evaluates risks, drafts risk management plans or protects itself against these risks in any meaningful or effective way. It is unreasonable to expect any company to prepare for all possible contingencies. However, companies need to take a much more proactive approach to making sure that vulnerabilities are addressed. During the current crisis, companies have been left without knowledge of each country’s precise emergency import policies, much less a plan to work with those policies or around them in the effect of a global emergency like this one. Risk evaluations must also consider the complex interactions between available stocks, fluctuating demand and shipping or travel restrictions. This cannot be achieved without constant and comprehensive mapping and monitoring of all suppliers and supply chains.
The third and final lesson, and perhaps the most important one, is that business strategies must consider people first. The health and security of both employees and clients must be paramount in daily operations and management of any enterprise in the sector. This must also be achieved through full transparency and availability of information for both parties. This creates work environments and relationships that can actually prevent further interruptions in service. When information becomes more available and readily shared throughout a supply chain in this way, variations in volume of produced goods or personnel become a lot easier to anticipate and manage.