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Supply Chain & Operations

COVID-19 Reveals Lack of Flexibility, Leadership in Supply Chains

This article was originally published in Freightwaves. View the original article here.

The COVID-19 pandemic has led businesses to rethink their logistics operations, as they bore the brunt of the pandemic while it disrupted sourcing operations. Countries closed their borders, and cities as well as entire regions went into lockdown, causing demand for nonessential items to plummet even as demand for essential goods skyrocketed. Though logistical turmoil of this scale has never been seen before, it reinforces the importance of future-proofing supply chains.

FreightWaves connected with Tom Reynolds, a global supply chain practice consultant at management consulting firm Egon Zehnder, to discuss issues that supply chain officers contend with during these challenging times.

“There’s an increased demand within companies to make their supply chains more flexible and dynamic,” said Reynolds. “This is challenging for supply chain leaders, as sourcing from multiple places would bring in a lot more complexities on the inbound side.”

Increased globalization and the prevalence of e-commerce have led businesses to count on customers spread all around the world, unlike the previous norm of a more localized and homogenous group of end consumers. This makes today’s supply chains vastly more complex, and supply chain officers point out the need to develop capabilities to handle that complexity seamlessly even during times of distress.

Companies are looking to recruit people who can drive innovative supply chain strategies, said Reynolds. “But it certainly is a challenge finding the right talent and leadership. Supply chain leaders are going to extreme lengths trying to attract smart people, including scouting across other industries. They are trying to build talent one way or the other,” he said.

In a survey conducted by Egon Zehnder with chief supply chain officers (CSCOs) from 235 companies, 79% of the respondents said they worry about recruiting people able to handle the increasing pace of change within the industry. Further, 37% of the CSCOs mentioned lack of leadership as the biggest hurdle to succeeding in a post-COVID world.

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Reynolds explained that one of the ways of reducing risks associated with logistics disruption is by decreasing how long a product moves through the supply chain from the time of order to the time the product reaches the end consumer.

“The primary focus is on how to reduce that overall cycle time, while also keeping it cost-effective. By reducing the number of decisions — also called stage gates — that need to be made within operations, products can be got through the supply chain at a very rapid pace, reducing the possibility of disruption,” said Reynolds.

An interesting finding from the survey was that culture and talent emerged as the top two of the three most important priorities for supply chain leaders to unite on, along with improving the cost-effectiveness of their logistics operations.

“There are these traditional supply chain organizations that aren’t quick on their feet, aren’t innovative or strategic — meaning that their culture and organizational setup needs to change dramatically,” said Reynolds. “Supply chain companies need to be more creative and innovative than they’ve ever been in the past, or they are going to be inconsistent with the rest of the corporate culture.”

COVID-19 might have been a blanket disruption, but disruptions are nothing new across the logistics world. Weathering frequently recurring challenges requires a flexible system that can move from one source to another in times of disruption, while also appealing to a customer base spread across several geographically distant markets.

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