COVID-19 hastened digital transformation of supply chains

Learn why supply chain digital transformation is top of mind for businesses in the wake of COVID-19.

Before the pandemic, cost reductions led manufacturers to outsource across countries and firms. This trend set the stage for COVID to tip off record levels of supply chain disruption, bringing business continuity and supply chain digital transformation top of mind.

“The situation has been especially difficult for businesses with complex supply chains, as their production is vulnerable to disruption due to shortages of inputs from other businesses,” the White House said in a blog. “These shortages and supply-chain disruptions are significant and widespread.”

The supply chain had its share of problems before the pandemic. Standard demand forecasting and just in time delivery suffice until the unexpected strikes. Plus, outsourcing was estimated to reach $688 million in 2018 and projected to reach approximately $1 trillion by 2023.

Why the supply chain was so vulnerable

Part of the disconnect is demonstrated by a McKinsey study, which found that only 2% of respondents have visibility into their supply base beyond the second tier. Lack of visibility beyond this tier is a breeding ground for potential supply chain risk. This growing exposure positioned larger companies to become increasingly open to disruption.

COVID exposed what we’d taken for granted, grasped headlines, and revived supply chain investment. Innovators looked for new solutions to solve their problems.

The extent of disruption

Reports include Clorox investing $500 million, Ulta spending $180 million, and Bed Bath & Beyond revamping their supply chain with $250 million. Report after report showed just how far wide and wide these disruptions reached.

  • 97% of supply chain companies in a Blue Yonder survey reported experiencing disruptions last year.
  • 87% of 2022 MHI Annual Industry Report respondents said that the pandemic has altered the strategic importance of supply chain operations.
  • 100% of respondents in the food and consumer-goods industries had experienced production and distribution problems, according to McKinsey.

The McKinsey study dug deeper into the struggles of industry professionals and the strategies they’re using to avoid the next great disruption through digital transformation:

  • 93% of respondents plan to increase resilience across the supply chain.
  • 90% of respondents plan to increase digital supply-chain talent in-house.
  • 85% of supply chain leaders struggled with insufficient digital technologies.
  • 75% faced issues in the production and distribution footprint that requires changes.
  • 60% of those surveyed plan to implement advanced analytics.

Challenges bring opportunity for digital transformation

As market laggards are still seeking visibility, the innovators are looking for answers to avoid the next great disruption. New tools are arriving every day to solve the most complex problems. Network optimization powered by augmented intelligence is a cornerstone of Optym’s mission to change the world through decision optimization. The world is ready to not only see change, but react faster and even anticipate change. Network agility is the new competitive advantage and there is a healthy appetite for new solutions.

Statista studied the adoption of technologies by supply chain companies in 2021 with over 1000 respondents. The study found inventory and network optimization tools had the highest rate of adoption in the next five years of the tools on their list. 28% reported they’re in-use today and 87% report they will be in the next five years.

MHI and Deloitte surveyed more than 1,000 supply chain professionals in the 2022 MHI Annual Report. According to the report, 87% of respondents said that the pandemic has altered the strategic importance of supply chain operations. 78% said supply chain transformation has sped up due to the pandemic and 64% are increasing supply chain investments.

Disruption and economic downturns are catalysts for change. Companies are reevaluating processes and software and looking for new efficiencies. It’s an opportunity for companies to find the right solution to ensure business continuity, and be a better supply chain partner through digital transformation.

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