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Getting Your Supply Chain in Order - How Companies are Handling the New Normal

Better supply chain management becomes a critical element of business strategy.

Covid-19 raised widespread fears about the health of the global supply chain. Early on in the pandemic, radical shifts in consumer behavior led to panic buying and product shortages with businesses straining to meet new patterns of demand. For better or worse, the experience unmasked serious cracks in supply chains for many businesses, large and small, and led to new levels of engagement in supply chain management.

Several of the key actions businesses have taken to better manage their supply chains in the post-pandemic economy have been revealed in a recent survey of senior supply chain executives by a leading global consultant.* These actions, which provide an instructive model for companies currently revising their supply chain strategies, include:

Building up inventories: The majority of respondents confirmed that they had taken steps, since the onset of the pandemic, to increase their inventories of critical products, components, and materials. As part of this effort, companies also sought to establish dual sourcing of raw materials.

Regionalizing: Most respondents had also initiated steps to diversify their supply sources across regions. This was particularly true of companies in the health care industry. In some cases, companies also took initiatives to “near shore” their supply sources, bringing them closer to production centers.

Digitally transforming: The pandemic helped to underscore the benefits of advanced analytics in supply-chain management. Half of the respondents across industries said they had implemented additional analytics capabilities in the twelve months since the onset of the pandemic. These capabilities included digital performance management and end-to-end planning systems, as well as network modeling tools to improve supply chain design in the future.

While the pandemic exposed critical fault lines in supply chain management, it also spurred the development of innovative solutions in response. By taking the necessary steps to improve efficiency and strengthen supply chains, businesses are better equipped to withstand inevitable shocks in the future.

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* How COVID-19 is reshaping supply chains, McKinsey & Company, November 23, 2021

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