Earlier this month, Dr. Martin Lockstrom, Senior Associate Professor of Operations Management along with team, disseminated the preliminary results of the recent study “COVID-19 Pandemic Supply Chain Survey: What Has Happened and How to do Things Better in the Future”.
The aim of the study was to investigate to what extent supply chains of companies have been affected by the COVID-19 pandemic and what measures they have taken to mitigate the effects. From the study, a number of best practices could also be identified, thereby serving as guidance for how to respond to high-impact macro events in the future.
In order to gather data, an online questionnaire was distributed to 986 managers of foreign and local MNEs with operations in China, and a total of 153 responses were retrieved. The HQ locations of these companies were relatively evenly distributed across the Americas, EMEA and Asia-Pacific regions. Two-thirds of respondents were senior managers at Director or VP level, and about one-sixth comprising c-level executives. The respondents represented a broad range of industries, spanning from machinery industry, electronics, utilities, retail, to automotive/transportation among others.
The study comprised six areas of a framework we call “Supply Chain Excellence Navigator” that are essential for effective supply chain management, namely 1) supply management, 2) demand management, 3) supply/demand balancing, 4) information sharing, 5) leadership/organisation, and 6) performance management.
In terms of supply chain impact, it turned out that most companies so far have primarily been impacted on the demand side, with significant impact on revenue and profitability, followed by HR and logistics-related issues like stock-outs and order fulfilment. Supply-side issues like raw material supply, supplier order lead times and rising raw material prices were reported, but to a relatively lower extent than demand-side challenges.
In terms of best practices, the study indicates that successful companies have taken a number of countermeasures to mitigate the effects from the pandemic like increasing safety stocks, qualified backup suppliers, and applied dual/multiple sourcing so as to reduce overall risk exposure. What’s more, high-performers did not only take more forceful action during the pandemic, but were also better prepared in general even before the pandemic started, as indicated by significantly higher scores overall across the dimensions of the Supply Chain Excellence Navigator.
From a broader perspective, it is clear that most companies to date have applied a reactive “wait-and-see” approach due to the high degree of uncertainty. Those that have fared most well are those that prepared even before the pandemic started by having a more agile supply chain that is more able to cope with rapid changes in the external environment.
Having said that, it is also clear that many companies have over time adapted to the long prior period of high stability and low uncertainty basically since the end of the global financial crisis by streamlining organisations and supply chains through implementation of concepts like “lean” etc., something which has now backfired for many. On the whole, the study highlights the necessity of having an “agile” rather than “lean” supply chain over longer time frames, and internal mechanisms that ensure a high degree of resilience during moments of distress.
For more information about the study, please contact Dr. Martin Lockstrom at [email protected].
