Nobody could have predicted the economic upheavals triggered by the Covid-19 pandemic. Between health restrictions, border closures, remote working and paralysed sectors, the logistics management of companies is under pressure.
Will your supply chain survive or thrive in the next global crisis? Find out how to make your supply chain tougher.
Preparing for the next global crisis
Global crisis and supply chain optimisation: Covid-19 and its lessons
Companies around the world are only just now discovering the actual impact of the Covid-19 crisis on their businesses. Each country has seen differing impacts specific to their own lockdowns and financial situations.
It goes without saying that the pandemic will have a long term impact on every organisation – and the supply chain is no exception. High levels of demand from China has led to supply imbalances and these have taken their toll on the logistics industry. Despite the resilience of the FMCG sector, a significant impact has still been felt worldwide.
Now is the time to look at which aspects of the restrictions on global free movement affected your business and how to mitigate against them.
Current issues to be addressed include the need to find reliable sourcing, production and distribution alternatives, something affecting all sectors. These measures need to be in place before another global crisis emerges. Smart companies are implementing anticipatory actions and strategies now.
Forecast models: When will the next global crisis take place?
The Covid-19 outbreak is the latest in a number of crises. Some are health related but others are political, such as Brexit; environmental, such as global warming, and of course financial. Global economic crises are inevitably cyclic, with at least one major crisis every decade. The last one dates back to 2008, and was the financial ‘subprime’ crisis.
To remain on the alert and to optimise the supply chain, companies need to be watchful for the signals. What factors typically sound an alert for an imminent global crisis?
- Particularly low interest rates
- Too much liquidity in the markets
- An increase in the price of raw materials
- An acceleration in the debt ratio (states, companies, and households)
- Major political tensions and commercial rivalries
What could happen to your supply chain in the case of a global crisis?
The entire global crisis has shaken up the balance on the marketplace. Both downstream, through falling demand, and upstream, through pressure on offer and supply. Due to fear or lack of means, households and businesses have reduced their levels of consumption. Excess inventory has forced companies to lower their prices to attract demand. This has led to lower profits. Given that there is less cash, banks need to increase interest rates. Access to borrowing and indirectly to consumption has become more complicated for households and businesses. Cash flow issues and investment difficulties follow along as a consequence. Less marketing, less advertising, less innovation...and therefore less demand (once again).
The economic crisis is a vicious circle which, without a back-up plan, leads to a domino effect. Those working in the supply chain, whether production, inventory management, finance or delivery, are all impacted.
A key word of the current pandemic has been ‘resilience’. What does that mean?
Resilience is the ability of a structure to predict and reduce risk, through effective contingency plans. Resilience is an essential skill, key for the proper functioning of organisations. How do you make your supply chain more resilient?
Resist the next global crisis: How to build the supply chain of the future?
Reactivity and proximity: choosing the right suppliers
To make your logistics management more resilient, make sure you can count on the responsiveness of your suppliers. Reviewing your partners is the best way to ensure the continuity of your logistics operations in the case of market disruption. Assess the strengths and weaknesses of your suppliers, and pinpoint the risks of supply disruption before they actually occur.
In Japan, the 2011 earthquake shook up the logistics management of several companies. The root cause? These organisations had little understanding of how their suppliers actually operated. They found themselves exposed unknowingly to the consequences of the natural disaster.
What’s the solution? Choose local suppliers. The Covid-19 pandemic very clearly illustrated the impact of closing borders and our dependence on international transport. The global pandemic clearly shows the danger of using independent suppliers located too far from one another.
By pooling sources of supply, companies can spread the risk of disruption. Even if a supplier lets you down, you can always count on plan B. For more security, it is wise to choose partners who cover a number of different geographic regions.
Review and planning: adapt to market changes
If your supply chain depends on a single logistics management company, the incurred risks are even greater in the case of a crisis. Consider dual sourcing with your logistics partners, reducing the risk to your supply chain. The Covid-19 pandemic has certainly exposed the excessive dependence of certain industries on Chinese suppliers.
This is the case for the automobile industry and new technologies (PSA and Apple being those that instantly spring to mind), but also with mass distribution. How long did it take for the UK to resume control over the distribution of personal protective equipment including masks? The health and economic crisis has led many companies to better distribute supplies to minimise the risk of shortages.
In crisis management, implementing business continuity plans, has turned into a necessity. They make it possible to detect supply chain fragility, and to build contingencies for more reliable transport, delivery and communication plans. For efficient logistics management, customers and suppliers must be involved in the development of these plans.
More flexibility for a more agile supply chain
To remain responsive in the event of a crisis, you should only entrust your distribution and storage network to those partners who possess agile capabilities. This agility, combined with adapted technologies and permanent availability, make it possible to meet market expectations irrespective of these external forces. But also to vary the level of production and delivery dependent upon your requirements.
The human factor, a key resource for managing your supply chain
Your employees and the partners involved in your supply chain have a key role to play. Adapting your business to meet the requirements of the ‘new world’ can include changing operating hours, promoting remote work and individual initiatives to help empower your supply chain. The success of your logistics management in the case of a crisis mainly depends on the productivity of human resources. The crisis management triggered by Hurricane Katrina in 2005 by Procter & Gamble is a good illustration. The FMCG company set up temporary housing, emergency funds and food for its employees.
How pallet pooling makes your supply chain resilient to the next global crisis?
In order to be resilient during the next global crisis, does your current logistics partner insist upon an increase in supply chain costs? No. But it does mean more efficient collaboration with your logistics partners. With a pallet pooling service, or pallet rental, you have flexible logistical support.
LPR is a logistics management company, which offers both digitisation and proximity for optimal responsiveness to demand, regardless of your location. Our network of service centres allows us to efficiently manage our pallet pool across Europe. LPR offers both a local and an international pallet rental and management solution, to support you in your response to emerging crises. LPR manages every aspect, including delivery, collection, storage, and pallet repair. Keep your competitive edge with the best pallets on the market.