Responding to COVID-19: what’s next for supply chains

COVID-19 has shone a light on inherent weaknesses in what are for many companies increasingly complex global supply chains. But the COVID-19 crisis is just the latest in a number of disruptive events (e.g., the Tokyo earthquake, Chilean unrest that affected copper mines, major cyber attacks, crop disease and extreme weather events all in recent history). The list goes on and won’t end with COVID-19. According to an EY Thought Center webcast poll, only 10% of executives felt well-prepared for dealing with the crisis, and a full third felt not very or not prepared at all (figure 1).

Figure 1. How prepared are organizations for disruption?

With supply chain operations accounting for up to 70% of a company’s cost, building a resilient supply ecosystem will lie at the epicenter of what comes next after this crisis. Existing supply chains have been cost-optimized, lean and tailored to just-in-time standards, but they are not designed for resilience.

Key steps to building resilience

• Assess and stress-test the entire supply chain, identifying dependencies and war-gaming to surface gaps
• Build capabilities to a road map, looking at changing demand patterns, backup plans and alternatives
• Use a digital twin that provides a software version of your physical system and simulate different scenarios, modeling your capabilities
• Establish early-warning systems, verify there is close monitoring of the entire supply landscape against a full range of potential threats and establish procedures to address what-if scenarios
• Build in flexibility; consider moving inventory, sharing services and resources with adjacent industries, and fostering collaborations that drive resilience

For now, you may have to start with data that is buried in incompatible, legacy enterprise resource planning systems. Eventually, blockchain will deliver this real-time visibility of the complete supply chain and analytics, that may include geopolitical and social data, and will provide for better forecasting. In the future, we should expect regulators, banks and boards to scrutinize the results of a companies’ fully stress-tested supply chain.

Upcoming events and resources

• Watch the “Responding to COVID-19: what’s next for supply chains?” webcast on demand here. You can also explore the latest EY webcasts.
• Visit https://www.ey.com/en_us/covid-19 for the latest EY insights and resources related to COVID-19 and the CARES Act.