Will the Covid-19 crisis lead to more resilient supply chains?

by Michael Haughton

The freight industry has no shortage of information at its disposal, yet it doesn’t always have the information it needs.

For instance, what happens when a ship is delayed and the trucks coming to pick up its goods aren’t provided with its updated ETA? Trucks sit idle, wasting time and money, contributing to the domino effect of supply chain disruption that can bring business to a halt.

Covid-19 has been a massive supply chain disruptor, shining a light on information gaps and an overall lack of preparedness that leaves supply chains – vital infrastructure for a well-functioning society – vulnerable. It’s not surprising that many businesses didn’t have the information or contingencies to respond to the crisis. It’s tough to predict a black swan, and until now business has relied on strategy that calls for lean operations (why invest in multiple suppliers when you can have one?) at the expense of preparedness.

According to the Chartered Institute of Procurement and Supply, 86 percent of supply chains around the world have been impacted by the Covid-19 pandemic, introducing new challenges and intensifying pre-existing ones. There are worldwide efforts underway to address the seriousness of these challenges.

Locally, Transport Canada worked with Wilfrid Laurier University to better understand how Covid-19 impacted Canadian supply chains and what helped some freight businesses fare better than others. The research showed that companies relying on technology were better able to build supply chain resilience and more successfully handle disruption.

Their success motivated others to beef up their preparedness and resilience by exploring new technologies, and likely accelerating adoption. In fact, 55 percent of third-party logistics companies, critical players in the supply chain, say they are now more willing to adopt new technologies than they were pre-pandemic.

Here’s a closer look at what supply chains can learn from Covid-19 and the role technology can play in helping to build its resilience:

Awareness and communication

Covid-19 impacted nearly every industry, in every corner of the world. Some businesses were able to respond quickly to mitigate disruptions and ensure business continuity, while others failed. The Laurier study found leaders of these more successful companies share characteristics that are similar to those of a good manager: They have awareness and strong relationship-building skills that empower them to communicate and connect with the core constituents in their complex supply chains.

Awareness may seem like a given, but our study found that freight companies may know that their suppliers are in China for instance, but they often have no idea where in the massive country those companies are located. Few have an understanding of their suppliers’ business practices, making it difficult to assess potential impacts, understand their current reality, or communicate backup plans.

How interconnected do companies need to be to strengthen their supply chains? Scheduling, coordinating, and communicating among multiple, geographically dispersed pick-up and drop-off sites requires a robust information systems infrastructure that demands ongoing maintenance.

A single domain expert who knows the ins and outs of their suppliers isn’t the answer. Rather than reside in one person’s head or on a laptop, necessary information needs to be efficiently and effectively shared with all those who need to know.

Mitigate future risks

While there is still quite a bit of uncertainty around the overall impact of Covid-19, there is one constant: businesses simply can’t predict what lies ahead, regardless of how this pandemic, or any other, unfolds. While warnings and the sources of risks are often obvious, they escape human radar because they are lost in a flurry of information that comes at a rate far too fast for humans to process.

There’s good news: companies of all types and sizes already have well-established risk management tools at their disposal with computing power to classify risks, measure severity, and gauge likelihood. The Laurier study found that some firms had these tools in place, previously untouched, and are now making use of them to better prepare for what may or may not lie ahead.

Time to consider options

The success of those who have adequate risk management technology is proof it’s time to evaluate options. Businesses that leveraged technology in 2020 were able to better meet business goals, for instance creating new efficiencies to cut costs, and meeting new challenges and accommodating costs brought on by Covid-19, such as minimizing workers’ exposure to infection risk. Companies are now considering technology that will help to build overall supply chain resilience, not just pandemic resilience.

Rather than getting caught up in the hype around the latest and greatest offerings, companies looking to invest in new technology should put purpose first, asking: “What do we want to do – understand our suppliers? Our risks? Do we have too much information or not enough? What do we want to achieve?” The answers will help to point to the solutions.

The Laurier research found that businesses are more open to disruptive technologies once deemed too outlandish, including robotics that free humans from labour-intensive, often mind-numbing activities, and drones and autonomous vehicles that promise to transform logistics. They are also considering goals that were once deemed too lofty – like remote piloting of ocean vessels.

Undoubtedly, there are barriers to adopting new technology, many of them financial. Covid-19 made massive dents in revenues across industries, leaving smaller budgets for technology investment. However, falling technology costs and a more competitive base of providers can provide the balance needed for true transformation. The fortitude of our supply chains may just depend on it.

Michael Haughton is principal investigator professor of operations & decision sciences, CN Rail fellow in supply chain management, Wilfrid Laurier University Lazaridis School of Business & Economics.