Reimagining global supply chains in a pandemic

THE Covid-19 pandemic and US-China trade war have upended long-established global supply chains in a relatively short period of time. As an immediate response, many companies have established crisis management teams to assess the impact of disruptions and provide direction to employees, customers and the other ecosystem partners about the actions taken to miti-gate the emerging risks.

In the medium to longer term, organisations are working to build better visibility and transparency across supply chains to equip themselves with the right information to make faster decisions when faced with uncertainty. Companies are also now more open to adopting digital solutions such as smart fac-tory, digital control towers, robotics process automation, and artificial intelligence, to create more resilient supply networks.

"Companies are reimagining ways of working effectively and building supply chain capabilities to work in a remote setting and rethinking their supply chain capabilities. They are keener to adopt digital solutions and are willing to undertake implementation of full-scale initiatives instead of just experimenting with proofs-of-concept," says Terence Foo, supply chain and network operations leader, Deloitte Southeast Asia.

IMPACT OF COVID-19

While a reshaping of global supply chains was already happening before the onset of Covid-19 - due to advances in automation, rising protectionism, and increasing frequency of natural disasters - the pandemic and worsening US-China tensions have accelerated this transformation.

"The Covid-19 and geopolitical situation has expedited the process, given that supply chains have never been stress-tested to this level before. Weaknesses in supply chains were exposed when restrictions in the movement of goods and people were imposed during the pandemic," says Rakesh Agarwal, partner, advisory, KPMG in Singapore

As the crisis curtailed the flow of goods and services, problems have been exposed in global production processes. These include unpredictable supply, impaired transport and communication networks, interruptions in financing, as well as regulatory and political risks.

According to the KPMG 2020 CEO Outlook COVID-19 Special Edition: Singapore Edition, this has resulted in supply chain risk being seen by CEOs in Singapore as the greatest threat to their companies' growth over the next three years. Some 42 per cent of CEOs in Singapore believe that they have to rethink their global supply chain approach due to the disruption caused by the pandemic, and shared that they have commenced doing so in order for their businesses to become more robust in the event of a natural world disaster.

DIVERSIFYING SUPPLY CHAIN RISKS

To diversify and minimise the risks of future supply chain disruptions, experts advise businesses to leverage key digital supply chain technologies, such as supply chain control towers.

"Building supply chain control towers can help to create a single source of truth, and this will enable all trading partners to be able to see and adapt to changing demand and supply scenarios across the world. Businesses also use supply chain simulation technologies to model supply chain strategies that consider current and future constraints to supply, demand and logistics," explains Atul Chandna, consulting partner, Ernst & Young Advisory.

Businesses should aim to adopt data-driven and machine learning tools that can provide greater intelligence for making informed decisions, he adds. "When machine learning algorithms are specifically applied to data based on past purchases, these insights can help organisations to understand where and when to source."

Companies are also looking to mitigate lengthy set-up times, manage the costs of alternative sourcing and create network flexibility by investing in single- or multi-site production, or through fully owned or contract manufacturing.

However, experts say that there is no overarching strategy for developing a resilient supply chain. For instance, in the heavily-regulated aerospace and defence industry, legal and regulatory considerations are crucial, while in heavily-taxed industries like automo-tive, duty management is crucial. As for e-commerce businesses, the priority would be logis-tics considerations such as speed-to-market.

"Companies should be clear about what the key drivers for cross-border supply chain efficiency are and prioritise accordingly. There is no one-size-fits-all solution and priorities will be varied from one organisation to the next," advises Marc Philipp, management consulting leader, PwC South East Asia Consulting.

BENEFITTING FROM DISRUPTION

Amid this unprecedented disruption to global supply chains, Singapore can benefit from the situation by leveraging its position as a regional hub that is used by international companies as a springboard into other Asian markets.

"Singapore is well-positioned to benefit directly and indirectly to be a supply chain hub or a manufacturing hub for high-end manufacturing. Singapore is geographically well-placed to be the regional supply chain hub for organisations looking to move or expand operations into Asean. It can also be an ideal location for higher-end manufacturing for life sciences, high-end machinery, 5G/IOT-based consumer and industrial devices," says Mr Agarwal.

He adds that Singapore can also play the role of a thought leader for managing operations across the Asean region because of its highly skilled workforce, seamless infrastructure and strong connectivity across the region.

Meanwhile, partnerships have formed between industry players and the government in Singapore to focus on the digitalisation of supply chains as a response to Covid-19. Says Mr Philipp: "Partnership between private and public sectors will be an enabler for Singapore companies to accelerate and coordinate the digitalisation effort amongst logistics service providers, financial players as well as exporters and importers."

Adopting new approaches

AS LONG-HELD assumptions are challenged by Covid-19, supply chains are shifting or being rebuilt to adapt and succeed in the new normal.

According to Marc Philipp, management consulting leader, PwC South East Asia Consulting, businesses are reviewing their approach to three supply chain disciplines most affected by the pandemic.

These are: