- Create contingency plans: Start with scenario planning strategies for different demand environments
- Mitigate supply shock: Work closely with existing suppliers while diversifying the supply base
- Manage demand volatility: Manage panic buying situations while taking on a responsible retailer role
- Make work safe: Invest in protective gear for supply chain workers and communicate via apps to manage time, availability and safety
While the initial shock of the COVID-19 pandemic has worn off in many countries, its domino effect on the global supply chain has continued to cause massive disruptions across industries and regions.
How can businesses face a global supply chain crisis and prepare for other catastrophes?
Understanding the full scope of a crisis, identifying potential outcomes, and implementing risk management strategies can help organizations feel more confident in their growth and satisfy customer needs at the same time.
Most importantly, acquiring data and modern technological tools can create visibility across the supply chain and, in turn, inform preparation for unexpected events.
How has the pandemic affected global supply chains?
In 2020, the global economy and international markets plunged as the coronavirus spread from China— the world’s second-largest economy—to other countries in Asia, Australia, Europe, the Americas and the Middle East. Policies intended to prevent the further spread of the virus, which include travel restrictions and quarantines, had unintended consequences of disrupting international supply chains, suspending business operations, and shrinking revenues.
Years after, there’s been a somewhat uneven path to recovery from the effects of COVID-19. The United States and the United Kingdom have lifted most mandates and restrictions in parallel to falling infection and mortality rates.
Yet, in 2022, China still faces disease outbreaks equivalent to the peak of the pandemic in 2020. Some of China’s largest cities experienced partial or full lockdowns and restrictions in April and May 2022, causing a whiplash effect once again on supply chains. According to data from the World Bank, China accounts for roughly 12% of global trade.
The impact on supply chains is twofold. For one, companies must again closely monitor short-term and long-term demand and inventory to accommodate production loss in the wake of factory closures and economic slowdown.
For another, retailers are faced with inventory depletion as consumers could again stock up in preparation for potential shortages or delivery delays. In spite of that possibility, some retailers have already faced an overstock due to record inflation rates in 2022.
“Retailers around the world are still grappling with the appropriate response to the coronavirus for their employees, customers and their business,” said Hilding Anderson, head of retail strategy for North America at Publicis Sapient. “For many, it's shaped into a once-in-a-generation test of business continuity, planning and supply chain flexibility.”
Preparing for supply chain disruptions
Events that have a very high impact on the market but have a very low probability of materialization—otherwise known as “black swan events”—make short-term and long-term consequences like panic buying, work shortages or limited supply hard to measure definitively. However, there are measures organizations can take that can help navigate risk when black swan events occur—and as they unfold.
Supply chain contingency plans as a top priority
According to Nitin Dsouza, director of strategy and transformation at Publicis Sapient, organizations should start with scenario planning strategies, where different demand environments are considered across the entire supply chain. While different organizations face unique risks, companies should develop plans for both optimistic and worst-case situations. In the case of COVID-19, these are defined as:
- Optimistic scenario: By 2027, COVID-19’s importance has been reduced due to high levels of international collaboration.
- Worst-case scenario: By 2027, COVID-19 remains largely uncontrolled, with severe recurrences in parts of the world.