Since the start of the COVID-19 global crisis the global production system has been challenged by factory shutdowns, demand surges for essential goods, stockpiling and panic-buying, as well as shifting consumer preferences. This has raised questions about the resilience of global supply chains and the overall approach to manufacturing. The World Economic Forum, in collaboration with AJ Kearney, brought together more than 400 C-level executives in charge of operations and supply from different industry sectors to identify best responses to the pandemic in the short-term and strategies that will help companies rebound when the crisis is over.
The May 5 report sheds light on the role technology will play in the strategies they are putting in place for the future. Full supply chain visibility is key in supply chain management, especially in times of crises. Some companies have to manage up to one million raw materials, components and finished goods spread across up to 100,000 suppliers. These inputs are transformed into finished products in thousands of manufacturing steps across hundreds of manufacturing sites and eventually delivered to up to 10,000 different customers. Technology and digitalization enable end-to-end visibility across the supply chain. “Having this visibility — ideally in real-time — is key to proactively run risk analyses and react fast when a crisis hits,” Joachim Christ, Head of Procurement, at global pharmaceutical company Merck, one of the participants in the study, says in the report.
To achieve this visibility, companies are leveraging technologies such as big data platforms and IoT as powerful tools to gather large quantities of data, or advanced analytics to generate required insights.Once companies have access to a large pool of data on their supply chain (sometimes referred to as a digital twin of a supply chain), the next step is to use this data to make data-backed decisions and predictions. Multiple companies are already using scenario or complex risk analyses tools, which draw data from a single “data lake”, to quickly evaluate options enabling companies to take fact-based decisions. However, the application of AI/complex algorithms which identify patterns in large samples to make predictions is still at the very beginning. The technology can predict certain demand trends or changes in prices, but is not yet broadly leveraged to, for example, proactively identify and manage risk. In contrast to AI, increasing agility in production processes is already used on a broader scale. 3D printing is currently proving itself as a big problem solver to certain shortages resulting from COVID-19. Multiple companies and institutions are using 3D printers to quickly develop and ramp up the production of urgently needed medical supplies such as parts for ventilator, or entire ventilators. As an example, a leading company in the space of 3D printing was able offer an essential part required for artificial ventilation. The part got FDA approval and production was ramped up to 100,000 pieces per day. “All this took only 10 days,” notes the report. “This example underlines how 3D printing can make supply chains more resilient. Not only does 3D printing allow companies to insource the manufacturing of critical components, but it also provides them with an alternative in case a supplier is no longer able to supply a certain component. ?
While technology can help with a rebound it is not a slam dunk. In the Forum’s survey two out of the three biggest barriers cited by executives to successfully revamping supply chains are implementing effective change management and adapting to and implementing new technologies.
Creating new forms of collaboration with government and across companies and industries to ensure business continuity while protecting employees and improving supply systems resilience will be necessary in future, creating other challenges.
Another of the lessons learned is the importance of developing stronger business continuity plans and operating shorter, regional supply chains that are closer to the point of demand, Mourad Tamoud, Executive Vice President, Global Supply Chain, Schneider Electric, says in the report. A move towards risk competitiveness will require some immediate changes to supply chain set-ups, such as increased resources in supply chain management and overall increased safety stock levels. Looking more at the mid- to long-term, companies indicated that they will “push for ruthless multi-sourcing across regions, reduced complexity across the supply chain and a more local supply chain set-up. While complexity reduction and localization can go hand-in-hand, multi-sourcing usually increases complexity and implies a regional diversification of the supply base so companies will have to carefully calibrate to find the right balance,” the report says.
The long-ranging impact of the COVID-19 pandemic is yet to be fully understood but five consistent key imperatives emerged for leaders to ensure the long-term success of manufacturing and supply, says the report. It lists:
*Rapid tailoring of manufacturing and supply systems to changing consumer behavior
* Agile manufacturing and supply system set-ups enabled by advanced technology
* Logistics coordination across and within global value chains
* Adoption of new ways of working and governing to increase manufacturing resilience
* Shared responsibility and collaboration among companies and authorities to address social and environmental challenges
“The companies that will prosper in a post-COVID-19 world are those that are already preparing for recovery by drawing key learnings from this pandemic and its impact on global businesses and strengthening their supply chains accordingly,” concludes the report.
Given the significant challenges involved in revamping the global supply chain The World Economic Forum’s Platform for Shaping the Future of Advanced Manufacturing and Production says it will continue engaging leaders across different industry sectors — from healthcare and automotive, to consumer goods and transportation and logistics — as well as governments — to understand industry-specific needs and help develop collective action plans.
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