Focus on robust supply chains set to continue post-pandemic

MR JANESH JANARDHANAN (left) and MR KEE WEE NG (right).
MR JANESH JANARDHANAN (left) and MR KEE WEE NG (right).

The need for more agile and resilient supply chains will remain a focus for companies at home and across the world even in the post-coronavirus era.

Companies were sent scrambling when the pandemic exposed the lack of a robust system that could ensure continuous supply of raw material to factories and finished products to end consumers.

After more than two decades when success was measured by efficiency or cost reduction, the events of the past year have changed the risk profile of global supply chains, said business leaders at a recent webinar jointly organised by Frost and Sullivan, I-Promo and Marshall Cavendish.

"Companies are actively incorporating just-in-case supply chain strategies into the time-tested just-in-time strategy," said Mr Janesh Janardhanan, Asia-Pacific senior director for transportation and logistics at Frost & Sullivan.

The goal is to achieve resilience, which most companies now see as critical to their business.

"New parameters and scenarios are being added to the risk situations in supply chains. Companies are evaluating the risk of globally concentrated manufacturing strategy and re-evaluating their dependence on single-supply sources from a single region or country," noted Mr Janesh.

He said companies are also using automation to optimise space and resource utilisation and achieve faster turnaround.

Other trends include near-shoring, or outsourcing to a nearby country, preferably a neighbouring one; leveraging of the sharing economy and crowdsourcing.

However, only time will tell if flexible and resilient supply chains can generate profitable growth in the long term. There will be a need to strike a balance between preparedness against unforeseen events and cost efficiency.

Mr Kee Wee Ng, vice-president of global supply chain management at Jabil, a manufacturing solutions provider, said the just-in-case strategy requires holding part of the inventory to respond to a supply constraint event. But if the strategy is not managed properly, it can cost a company dearly. "It is not going to be cheap, there is going to be cost involved."

A survey recently conducted by Jabil and Dimensional Research found that nearly 30 per cent of respondents said they talk about supply chain resilience but do not adequately fund it.

The extended lockdowns last year and mobility restrictions still in effect have not just changed the way businesses now look at their procurement and distribution channels but altered shopping behaviour that may transform consumer business forever.

A recent McKinsey study showed that at least 65 per cent of consumers in nine of 13 major economies said they have tried new kinds of shopping, and 65 per cent or more in all nations polled said they intend to continue to do so.

Companies will also have to take into account how consumer behaviour has changed because of the pandemic and what trends will persist in the long run.

Mr Eugene Lee, chief operating officer of gogox, a last-mile delivery platform, said increased digital adoption and the boom in e-commerce may stabilise after the pandemic but will not completely disappear. "This new customer mindset is going to change how businesses interact with customers," he added.

Mr Lee said people of all age groups have now become used to ordering what they need online, and the ease of placing these orders and getting served in a timely fashion have changed their expectations. "Businesses are reopening but they should be prepared to be open to the new normal as well," he said.

A version of this article appeared in the print edition of The Straits Times on January 22, 2021, with the headline 'Focus on robust supply chains set to continue post-pandemic'. Subscribe