Covid-19 prompts major rethink of supply chain resilience

 The global supply chain disruptions caused by Covid-19 have led to a major increase in the number of organisations using technology to assist with supply chain management and mapping, including a near doubling in the use of tech-based supply mapping, along with much more engagement among senior management with supply chain issues.

According to the 12th annual BCI Supply Chain Resilience report from the Business Continuity Institute (BCI), more than half (55.6%) of organizations are now using technology to help analyse and report on supply chain disruptions, with the number using technology to help with supply chain mapping seeing a major increase to 40.5% – up from just 22.6% in 2019.

More than half of organisations (57.6%) report that COVID-19 has been the reason for investment in new technology and tools.

The number of supply chain disruptions organisations encountered in 2020 was higher than any other year in the report’s history, with one in four (27.8%) of organizations reporting more than 20 supply chain disruptions during 2020 – up from just 4.8% reporting the same number in 2019.

Organisations blamed COVID-19 for the dramatic increase in the volume of disruptions, although European respondents reported disruptions due to Brexit-related issues.

Disruptions beyond tier 1

COVID-related disruptions were also more likely to occur beyond tier 1, the report noted, highlighting: “The importance of knowing your suppliers’ suppliers was emphasised this year when respondents reported that 40.2% of COVID- related disruptions were due to disruptions in tier 2 and beyond. Although this year’s research shows that organisations’ due diligence beyond tier 1 is improving, COVID-19 has served as a tool to uncover where the gaps in processes lie.”

Solving the logistics puzzle

Solving the “logistics puzzle” has been a key challenge to organisations during 2020 – and that is set to continue into 2021 and beyond, the report noted, with all methods of transportation affected because of COVID-19.

“At the start of the pandemic, air freight providers repurposed passenger planes to make up for the lack of belly cargo availability, land transport had its own challenges with goods being held up at borders and sea freight is now struggling with global container shortages. With global vaccine transportation dubbed the biggest logistics project since World War II, the logistic headwinds are likely to continue into 2021 and beyond.”

Senior management more engaged with supply chain issues

Senior management are now more engaged with supply chain issues, the report highlighted noting that 82.7% of respondents report management commitment to supply chain risk is now “medium” or “high” – up nearly 10 percentage points on 2019.

The report also shows how supply chain issues led to balance sheets taking a hit in 2020 “which has meant board interest has become high. With Governments now clamping down on issues such as modern slavery within supply chains, business continuity (BC) professionals are confident that this elevated level of interest can – and should – remain.”

Critical suppliers

Organisations are also now more likely to interrogate the BC arrangements of critical suppliers, the report found, highlighting that more than three-quarters of organizations (75.2%) report checking that key suppliers have BC arrangements in place – up from two-thirds in 2019.

“Interestingly, most professionals admitted this was not due to COVID-19, rather ongoing reviews of how suppliers should be managed,” the report’s authors said. “A further positive finding this year is most organisations are now going beyond a ‘tick box’ exercise when carrying out their due diligence processes: more than half now request full details of BC programmes rather than merely asking if a plan is in place.”

More due diligence

The report said more due diligence should be carried out pre-contract, noting that just one in six organisations carry out due diligence on all key suppliers’ BC programmes at the procurement stage, and a quarter fail to do so until after contracts have been signed.

“Ensuring BC arrangements are checked pre-contract is vital to ensure suppliers can continue to meet contractual requirements during periods of disruption,” the report noted.