How Coronavirus Brought the Shortcomings in Supply Chain Management into the Limelight

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COVID-19 global pandemic is taking the world by storm. Before the outbreak of coronavirus in first world countries like the U.S.A, Great Britain, and Italy procurement teams were trying to keep up with the latest news about global response measures. Organizations have also tried their best in securing raw materials while protecting supply lines. A major challenge they faced is the lack of vital information. This made the response of procurement teams reactive and uncoordinated. The suggestions of sourcing agents are also of no help. On the contrary, a small minority of companies have invested in tracing their supply networks before the pandemic emerged. These companies are getting better visibility into the structure of their supply chain networks. Instead of muddling up in the last hour, these firms kept their headstrong. They are successful in detecting which suppliers, sites, parts, and products are at risk while taking necessary steps to secure constrained inventory.

Defects in Modern-day Supply Chain Management

The defects in modern-day supply chain management are listed as follows:

Supply network mapping resources are expensive

Several companies and business leaders had proposed supply network mapping as an effective means to combat risks, but when it comes to implementation, they are often negligent in their approach. Business heads anticipate a large amount of labor and time required to complete this task. Mapping their supply networks is not an easy task for organizations. They have to face several hardships during this procedure.

Most new-age organizations are relying on human intelligence from top-tier suppliers. However, the information collected via personal relationships is a mere conjecture. In this case, it will take years for new employees to know immediate suppliers. According to experts, tracing supply networks is difficult for organizations of all sizes. No doubt, it is intensive and difficult in more ways than one. However, the value of the supply map is greater for business firms when compared to the cost and time to structure it.

More often, the procurement personnel of organizations uses the bill of materials while focusing on major components. The process starts with the top five products by revenue and encompasses its component suppliers and raw material suppliers. For gaining better insights, organizations can seek assistance from sourcing consultants. Their formulated strategies will help organizations in streamlining their procurement operations. The goal of every organization is to cover as many tiers as possible. The supply map also includes activities of the primary site. Besides this, the alternate sides relating to the suppliers are also taken into account.

Cost savings and not revenue-assurance is the determinant of the procurement function

Needless to say, the procurement activities of organizations are centered around cost savings. Marketers can get access to the supplies at the lowest possible costs. However, these supplies must fall within specific quality parameters. In times of increasing consumer demands, organizations need to resort to appropriate procurement measures. It helps business firms to secure their supplies on time.

The key gaps in supply chain management can only be minimized if people from diverse sectors like procurement, logistics, and supply chain work collaboratively. Their suggestions are bound to come in handy for organizations during disruptive events like in this case a pandemic outbreak. This will help organizations in addressing their procurement goals with the general business objectives. The sourcing agents give effective advice to organizations regarding the successful implementation of their cost savings approach. However, the aspect of quality assurance is often neglected.

Supply chain disruption is not associated with supplier performance metrics

Both buyers and suppliers suffer when a disaster comes. The same is happening with the COVID-19 outbreak. For assessing the standards of suppliers, business firms are implementing disruption-related metrics. It is very much prevalent during the selection of suppliers and formulating the initial contract.

A large number of big-sized organizations are using language that requires the supplier to engage in supply-chain mapping efforts. In this adverse situation, these supply maps come to the rescue of organizations. More often, organizations use these maps to come up with an effective solution. For example, the Chinese suppliers made more than 3000 force majeure declarations when the COVID-19 pandemic started to take its toll. The procurement teams of companies should try to develop contracts that propose expected recovery times and methods during such unforeseen circumstances.

The world is reeling under the impact of COVID-19. Experts are of the view that when the COVID-19 crisis will dissipate, we will see organizations fall into one of two categories. Some business firms will hope that such a disaster may not happen again. Organizations should take help from sourcing consultants to get acquainted with the economic and political scenario of their sourcing destination, especially after the pandemic. Organizations that invest in mapping their supply chain networks are very likely to come victorious.

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