DHL study: supply chains have to adapt to the new conditions so that they can recover from the crisis
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The Corona pandemic could change the world forever. The current crisis will accelerate the changes that have already begun and will reveal new trends and priorities. This means that consumers, companies and supply chain managers will have to find their way in “the new” normal. The recently published DHL study presents current challenges for supply chains and provides insightful tips on how to master them.
What does the new normal mean? How are the individual phases that lead to this new normal? How is such a transition to be mastered? How will the post-coronavirus phase affect supply chains? What role do supply chain managers play in this? What measures must be taken to ensure the resilience of future supply chains? The authors of the DHL study: Professor Richard Wilding, Dr Klaus Dohrmann and Dr Malcolm Wheatle tried to answer all of these questions in detail.
Transitional phase before the new normal
According to the DHL report, supply chains are currently in a transitional phase, what the paper calls the pre-new normal stage. This should be seen as preparation for “the new normal”. Before the supply chains can recover from the crisis, they must be adapted to the current conditions and effects of the pandemic. This requires extensive changes to procurement, transport and storage networks, which are essential to survive in the new world after the coronavirus. After all, it will be impossible to bring the supply chains up to the level before the pandemic all at once.
According to the study, this transition phase can be measured in months because changes at the technological or business level are quite flexible.
Transparency and investment in digital transformation are the keys to success
It will be crucial to achieve transparency across the supply chain as quickly as possible, emphasised Klaus Dohrmann, Vice President Sector Development Engineering, Manufacturing & Energy at DHL Customer Solutions and Innovation.”
In addition to ensuring transparency, the study also mentions investments in digital transformation and the identification of alternative delivery and sales channels as the key to success in the transition phase. “However, this will take more time. Diversification often requires the development of entirely new supply chain networks and infrastructures”, the report said.
Increase resilience and efficiency in supply chains
Knowing the supply chains, all suppliers up to the third level and even possible alternatives for them is the prerequisite for long-term decisions [in the direction] of the new normal. This also means new transport and storage networks as well as increased resilience and efficiency of supply chains, ”said Dohrmann.
Regarding warehouse networks, the report recommends that supply chain managers carefully examine where and in what quantities inventory is stored, and where buffer stocks are most needed. The proximity of the warehouses to suppliers and customers, the knowledge of their typical level of demand and their responsiveness during a disruption are also particularly relevant.
The study also shows that securing stocks for the needs of the transition period mentioned above is extremely important because consumers create more volume but go shopping less frequently. „They prefer online shopping because of social distance,” the report said, citing the continued effects of the whip effect.
The corresponding switch from normal purchase patterns for brick-and-mortar shops is another challenge that has to be mastered.
Channel conflicts and fundamental analysis of customer expectations and service costs must be taken into account,” emphasized Dohrmann.
The short-term switch to e-commerce models during the crisis did not allow proper preparation and implementation of the right cost, fulfilment, or sales models. Choosing the right or even new partners in the coming months could help build a successful e-commerce ecosystem, he adds.
In addition, moving away from just-in-time inventory planning will be critical not only for manufacturing, but also for food, consumer goods, and other industries.
The final conclusion of the study is: “Resilience is cost neutral. There may be additional costs involved, but it is often worthwhile to pay for the resulting additional protection and security. ”