Supply Chain Management is Back: Here is Why

Pre-pandemic, businesses in developed economies could receive almost everything on-demand, aided by increasingly open borders and advancing technologies. Whatever we desired could be packaged and couriered to our door, in some cases just hours after placing the initial order. When the pandemic struck, businesses were shaken to the core in many ways, especially in how we deliver goods. Many companies, including retailers and distribution companies like Amazon, capitalised on lockdown due to the advanced nature of their supply chain. However, many companies are finding the current environment more challenging and more expensive, with the consequences directly impacting the end consumer. 

Post-covid supply chain management

Many brands had to pivot mid-pandemic, and some of those processes have remained in place. Supporting Insights from McKinsey and Company state, “When we surveyed senior supply-chain executives from across industries and geographies, 93% of respondents told us they intended to make their supply chains far more flexible, agile, and resilient.” 

Some companies have even gone on to charter their own cargo ships to mitigate some of the challenges supply chains faced amidst the pandemic. Bloomberg UK elaborated on general thoughts within the industry, stating, “The tumult has forced companies to lavish more attention on their supply-chain professionals….”

The changing landscape blindsided many industries, and the seismic shifts have revolutionised entire sectors. As a result, many companies have taken pre-emptive measures to counter future challenges, including how we train the next generation of experts. “Business schools are now emphasising risk mitigation and data analytics, while also carving out the room to explore more intangible topics like ethics, communication, and sustainability.”

Lessons learnt

The outbreak of COVID-19 has exposed the vulnerabilities of many businesses and highlighted the importance of supply chain resilience. Many cracks in traditional supply chain systems came to light, and disruptions showed them to be inflexible. This lack of adaptability proved vast as they could not quickly adjust to rapidly changing demand and supply conditions. In particular, supply chains struggled to cope with the sudden increase in demand for certain products and the disruption to transportation and manufacturing caused by the pandemic. As a result, many suppliers had to make tough decisions about which customers to serve or rely on market pricing, to prioritise higher-paying clients. The pandemic has also highlighted the importance of having a diversified supplier network and agility in switching suppliers. Hitendra Chaturvedi, a supply-chain management professor at Arizona State University’s W.P. Carey School of Business, commented that a portion of the problem could be attributed to a lack of diversity in supply-chain education. He further stated that “theories had grown as rigid as some of the practices out in the real world” in Bloomberg UK. “After years of teaching without any tremors,” he says, “our courses had become less flexible.” 

As the world becomes increasingly interconnected, businesses have found it easier to source products and services overseas. However, this global supply chain can sometimes lead to new challenges not experienced by local, on-shore or near-shore supply chains. Therefore, businesses must utilise robust supply chain models, prepare for challenges, and source responsibly. 

These ideals are not without challenges. Building relationships with local suppliers, customers, and other business partners can be complex. Additionally, it can be challenging to monitor production quality and assess working conditions- especially if there are not strong communicative ties between you and your suppliers. Nowhere is this more true than in the Chinese marketplace.

Supply chain management in China

Relationships are a cornerstone of business culture in China and have been for centuries. Guanxi often described as “connections” or “relationships”, is a concept that is essential to success for the CEO of a foreign company setting up operations in China. Mutual respect, trust and understanding of each other’s needs can heavily impact overseas effectiveness and make or break supplier relationships. This approach lends itself best to a face-to-face approach- particularly within Chinese culture.

We are going to be releasing a blog about Supplier Management, so check back soon!

Transparency and insight are two fundamentals that can benefit every company. So the idea that businesses should nurture supply chain relations is neither new nor uncommon. Reinforcement of this need is unpacked in depth by multiple scholarly articles, including the British Journal of Management. Further, a piece published by the Journal of International Business Studies mused that ‘stronger joint relational governance, accompanied by a willingness to be flexible…can further handle risk.’

The journey China has taken in adopting new technologies and frameworks for supply chains – Alibaba

Alibaba is a massive online and mobile commerce company that offers various services, including marketplaces for businesses to sell their products and tools to help others with their marketing and logistics. Alibaba also strongly focuses on delivering essential goods and supplies to customers, which has led the company to develop an innovative supply chain model. Rather than relying on traditional brick-and-mortar stores, Alibaba has created a network of small warehouses strategically located near Chinese cities. This network enables Alibaba to offer same-day or next-day delivery, a significant selling point for many items. In addition, Alibaba’s use of technology throughout its supply chain also helps to keep costs low. For example, the company uses artificial intelligence to track inventory levels and plan delivery routes. They also utilise technology business-wide to forecast, plan and learn.  As a result, Alibaba’s supply chain model is highly efficient and keeps costs down for both the company and its customers.

Although there have been quality and vetting concerns around Alibaba’s suppliers, the model itself works. Furthermore, their innovative model has created a net positive impact on the Chinese economy- a country increasingly focused on streamlining and automating its supply chain processes. 

Navigating the situation 

“So far, we can advise the same we are advising for two years already: Reconsider your global strategy, secure your supply chains, continue to diversify, plan in scenarios, get your business case right.”
German Industry Association

With the rapid globalisation of modern business, Strengthening the supply chain is more crucial than ever. It serves as a single gateway to bridge communication gaps within cross-cultural cooperation. This high level of integration also assists business owners in achieving further transparency across their supplier’s various staff, management and upstream supply chain to maintain vision and protect their IP. 

The situation across China regarding the Covid-19 pandemic remains highly changeable. Kinyu SCM provides weekly high-level reports via Linkedin, so follow us on our LinkedIn page. If you would like a detailed Covid report on your supply chain, please book your free appointment with our team!