The future of supply chain

Opinion: A Post-Covid 19 World for Supply Chains: Back to the Future?

Guy Courtin Last Updated: August 28th, 2020

Guy Courtin, Director of Partners and Alliances at 6 River Systems, has a 15-year history in supply chain and has long been a go-to resource for better understanding the impact of technology on the future of the industry. We asked him to share his opinion on what he imagines the future of supply chain might be as the world shifts closer to its new normal. The opinions in this article are Guy’s and do not necessarily reflect those of 6RS.

The future of supply chain

As members of our communities and as supply chain professionals, we’re all envisioning the time when we all get “back to normal.” However, as we saw in China after SARS in 2002, it’s possible that ‘normal’ won’t quite look like what we’re used to.

What might our world resemble in a few months?

Some are predicting that eCommerce will emerge stronger once we get through these strange times. Others are wondering if brick-and-mortar stores will rebound with new traffic due to pent-up demand and a consumer base tired of sheltering in place. Of course, the overarching question is how our supply chains will be impacted by the sudden shift in behavior.

From a supply chain perspective, here are some thoughts on what I think a post COVID-19 world might look like.

eCommerce grows, but not how some expect

Relative to strong year-over-year growth trends (upwards of 20%), ecommerce had “cooled” slightly before the pandemic hit.

However, with many countries asking their citizens to shelter in place and non-essential retailers to shutter their physical operations, it is regarded as the perfect storm for eCommerce to leapfrog prior estimates for growth. There is no doubt that grocery delivery has seen a surge – Instacart has seen a 300% growth rate in their services, but that is merely one retail category. If we dive into which categories are doing well, it is clear that many of the highest growth items are driven by the pandemic. Disposable gloves are number one with a 670% growth rate year over year. More growth figures can be found here. These are not hyper-growth categories in “normal” times. Will consumers who are buying online for the first time due to the pandemic continue to do so? Maybe, but likely in more traditional categories.

I predict there will be a large swath of consumers with a renewed appreciation for heading to a physical store to make a purchase, leading eCommerce to continue its march to reach 20% of overall market share of retail sales…but at a similar pace as it was a few months ago.

Local and national governments assume a new degree of importance within the global supply chain

Those of us who have worked in supply chain for the majority of our careers have been well aware that our businesses are intertwined. Our global economy is truly that: global. The challenge lies in who is responsible to lead when black swan events such as COVID-19 strike. Realism, at its core, dictates that nation states act in their own best interests. However, when we live in an interconnected world, there must be more collaboration and an acceptance that nation states can and should act with the greater interest of the whole in sight.

Governments will have to rethink how they act within our interconnected global supply chains: how they allow the flow of goods, how they monitor areas where products are sourced and manufactured and how they regulate cross-border labor. A post COVID-19 world will force our governments to adjust how they regulate and collaborate with global supply chains.

Supply chains rethink safety stock

The traditional view is that inventory should be treated like calories: we need a certain amount each day to function, and things tend to go south when there is excess. But have we taken too radical a view when it comes to inventory levels?

Trying to “lean out” our supply chains has been the mantra for ages. We strive to reduce working capital. Safety stock is “bad.” Do we need to reassess this? Look for certain supply chains – think medical devices, pharmaceuticals – to rethink how they view safety stocks. This will push financial institutions to reconsider how they measure the financial health of these businesses.

Fulfillment networks take on greater importance

Continuously improving fulfillment remains the goal of all supply chains. Much work has been focused on last mile fulfillment. Post COVID-19, we will realize how much further we have to go with improving this aspect of the supply chain. It is not enough to have enough inventory in the right place, you must also have the right personnel and tools to process these orders and deliver them safely to their destinations. Emerging from the pandemic, supply chains will have to accelerate their efforts to advance how we fulfill orders.

Adoption of automation accelerates

Right now, our susceptibility to infection is driving the adoption of automation across all verticals. Will this epidemic drive more calls for automation? Absolutely. But similar to the growth in eCommerce, robotics adoption was already on the upswing.

This trend will continue when we emerge, but we are also witnessing unemployment in sectors that will not simply hand the role to a robot. I predict we will see a greater adoption of automated tools assisting, rather than replacing, humans in specific roles within our supply chains: warehouse, manufacturing and distribution.

Supply chains will be crucial to helping the world emerge from this pandemic. Global supply chains will also ensure we find a new normal and most importantly prepare ourselves for the next shock to the system. The global system is incredibly resilient. Supply chains have been through major shocks and come out on the other side. This will be no exception.

In the meantime, stay home, wash your hands and stay safe. I look forward to when we can meet face to face again to discuss what our supply chains will look like…but also just to enjoy a coffee together.

 


 

Guy Courtin

About the Author

Guy Courtin is the Director of Partners and Alliances at 6 River Systems.
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Courtin has more than 15 years of experience in technology and the supply chain space. Prior to 6 River Systems, he was a VP at Infor Retail and was responsible for strategy in Infor Retail’s industry and systems solutions team. He also served as vice president and principal analyst at Constellation Research, where he focused on the impact of digital disruptions on supply chains. He also served as vice president of SCM World. He has published numerous reports on the state of supply chain and has been a regular speaker at industry events.

Guy holds an MBA in Management from the Olin Graduate School of Business, a Master’s in International Relations from Loyola University Chicago and a Bachelor’s degree in Political Science.