By Phil Davis
The recent blockage of the Suez Canal by a container ship is, after COVID-19, yet another stark reminder of the volatility and fragility of global supply chains. The jamming of this critical waterway held up around 12% of the world’s sea freight and caused shipping rates and oil prices to surge.
At least $9 billion of global trade was held up each day during the crisis, and companies worldwide will feel the knock-on effects for months, according to shipping giant Maersk. These two crises were wake-up calls for global businesses that rely on just-in-time inventories with little room for error. And, without just-in- case inventories on hand, assembly lines went quiet, which is more worrying.
This came after a tumultuous year for supply chains as the COVID-19 pandemic and the accompanying lockdowns enforced around the world left many organizations scrambling to keep up with rapid changes in the ecosystems they occupy. Like the Suez, the disruption to supply chains during the pandemic was also particularly sudden and acute, forcing businesses to completely rethink their processes and come up with solutions to massive new challenges almost overnight.
Today’s supply chains are vast global networks of manufacturers, suppliers, logistics, and retailers working together to deliver products to the end customer. These expanding networks are becoming more complex and disparate as they grow and as globalization advances, and companies using these networks have learned from the pandemic and the Suez blockage. They understand with new clarity that they can’t take supply chain processes for granted, and that technology plays a crucial role in powering the agility they need both in a pandemic-affected world and beyond.
Building supply chain agility
In crises, time is of the essence. During the pandemic, timing was critical in the delicate traditional supply chain ecosystem. Businesses had to think fast when considering how long it would take to move to a new supplier, whether to start manufacturing, or how much vital inventory to store. The supply chain volatility caused by lockdowns also profoundly impacted people globally, as access to even basic services, food, and medical help was threatened. Across Asia Pacific, organizations are reacting faster and being more proactive than their global counterparts in taking steps to address disruption.
According to the EY Capital Confidence Barometer survey in August 2020, 67% of Asia Pacific respondents are taking steps to change their supply chains compared to 52% of global respondents. In the digital sphere,
39% in Asia plan to change their digital transformation compared to 31% globally. This is largely due to the region’s culture of adaptability and practicality, coupled with heavy technology investment, especially by China, which was already transforming before the pandemic because of trade tensions with the U.S.
Implementing truly resilient supply chain solutions calls for a fully functional, flexible technology platform with services that enable traceability and transparency. These empower all parties in the supply chain to have the right information to make real-time data driven decisions. Relationships matter too – having the right partnerships with trusted vendors who have an aligned approach to supply chain management is essential. Robust cybersecurity processes are also increasingly important to supply chain security and resiliency, and are a top priority when designing supply chain processes.
Cloud as a driver of innovation
The disruption caused by the pandemic presented an unprecedented opportunity for companies to re-think their supply chains, assess business impacts, and modernize in the cloud. Facing massive spikes in demand, dips in supply, and fluid lockdown protocols, businesses need the agility to create new ways to move products and drive efficiencies. Companies can leverage cloud technology to identify supply chain gaps, plan for different scenarios, and mitigate risks. Cloud computing is the engine that makes supply chains talk to each other in real time, giving companies the data they need to act swiftly and focus on cost, quality, and delivery, while also being able to respond quickly to avoid supply shocks. We expect the new normal to be propelled by an end-to-end supply chain powerhouse that includes key drivers like inventory visibility and optimizations, personalization, automation, and fulfillment.
Such a solution will be built on a single technology that leverages insights and recommendations from Artificial Intelligence (AI) and Machine Learning (ML), so people working throughout the supply chain make the best possible decisions for their business. Swiss multinational food and drink processing conglomerate Nestle, for example, digitized their raw material ingredient data at the source of harvesting to provide a full history of location, time harvested, shipping, and quality information. This increased visibility allows customers and supply chain partners to track their products on the blockchain from the farm all the way through to consumption.
Technology, data, and AI/ML make supply chains more efficient, run more smoothly, and deliver value to businesses and their customers. When companies are confronting challenging times and uncertain futures, the agility that cloud computing delivers is a crucial benefit that gives companies the ability to adapt rapidly using the right data and skills when they need them. The past year’s lessons have been valuable in that they have shown the supply chain world that to modernize is to survive, and those who have done so are well placed to face any challenges the future may hold.
By Phil Davis, Managing Director for Asia Pacific and Japan, Amazon Web ServicesBuilding supply chain resiliency in today’s business unusual