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September 01, 2020

The New Supply Chain: How Shipping is Changing Due to COVID-19

 

Supply Chain Automation Robotic Conveyor

 

For a while, it was toilet paper. Customers are still noticing shortages of certain goods, varying over time, from the negative effect of COVID-19 control measures on the supply chain. Companies have had to pivot and make changes to ensure that their customers, both businesses and consumers, can get the products they need in a timely manner.

Some of these changes will be short-term. Others might affect how shipping operations work for years to come or even represent permanent changes. So, how is the pandemic changing shipping, and which of these changes might linger?

Lockdowns Causing Local Disruption

The effect of the pandemic has moved, and continues to move, across the globe. In March, the largest concern was loss of manufacturing capacity in China, forcing companies to scramble for other sources. As various places get hit hard and are forced to lock down, or become short-handed due to illness and quarantine, companies will continue to have to source from different locations.

This favors companies who have a flexible and agile approach to supply. One thing end consumers may have noticed is different brands, especially of high-demand products such as hand soap and sanitizer, showing up on their supermarket stores as supermarkets source products they would not previously have considered.

Going forward, companies with a legacy approach to sourcing are likely to realize that this is not going to be good enough; that it's important to have multiple sources for products that allow one to work around temporary supply chain disruptions in ways which minimally inconvenience customers.

Automation is Increasing

Remote equipment surveys, remote maintenance, IoT monitoring; shipping is becoming more and more the province of robots, accelerating trends already well under way at the end of 2019. While unmanned trucks are still a few years out and unmanned ships the realm of science fiction, there is still likely to be a solid increase in automating those things which can lead to reducing the number of people on site in warehouses. Technicians may work primarily from home, coming into the warehouse only when they need to get their hands on equipment.

There is also an increase in the use of software to control shipping routes and supply chains, and that is very likely to continue into the future. AI assist will become routine for anyone designing supply routes and choosing vendors, and supply chain resilience will be part of what they take into account.

Consumer Demand is Unpredictable

One major factor of concern is that consumer demand, often fickle, has become even more unpredictable during the pandemic. In general, shipping to end users has increased considerably, causing staffing issues for couriers and the USPS and resulting in slowed delivery times. Companies that have been able to keep up good shipping times are likely to be remembered by customers.

The end of the pandemic is likely to make demand even more unpredictable for a while. Although there will certainly be a shift back to more brick and mortar shopping, some people may be reluctant to make the switch back due to convenience or lingering fear of social contact. Also unknown is how rapidly the restaurant and tourism industries will recover.

In some cases, pent up demand may result in another spike in shipping, but some of the money that would have been spent may be "gone" due to reduced employment or people simply putting money in savings.

All of this has a knock-on effect on the supply chain. Eventually, things will stabilize, but it may take several years before post-pandemic demand levels can be readily predicted.

This again shows the need for agility and flexibility. Traditional replenishment models are generally manual, unsophisticated, and assume reasonably steady demand.

 

3D Printer Printing Prototypes

 

Additive Manufacturing has Played a Role

Ventilator shortages were constantly in the news during the first part of the pandemic, becoming less so as standards of care evolved. However, additive manufacturing (colloquially called 3-D printing) proved to be a significant stop gap for providing spare parts for ventilators. It is also being used to create face shields.

Is there a role for additive manufacturing in some supply chains? For items that are rarely needed or have to be heavily-customized, additive manufacturing can work well; for most mass-produced products the per-unit cost is too high. As additive manufacturing enters the supply chain, there becomes an additional sourcing issue. The plastic or metal filament used in 3-D printers also has to be moved, and in some cases recycled plastic is used.

While additive manufacturing is less useful in a non-emergency situation, the attention brought to it might increase awareness and potential use in the future.

Some Shortages Have Been Directly Supply Chain Related

In the U.S., a lot of people reacted to the lockdown by...baking. Quarantine baking became so much a thing that flour shortages developed.

The thing is, there was never actually a shortage of flour. What there was a shortage of was flour packed for retail sale. With restaurants partially shut down, there was lots of flour in large bags, but not enough in small retail-sized bags for the home bakers. This is an example of a shortage caused by a sudden and rapid shift in who was demanding a product.

Yet again, companies needed to be more flexible and able to pivot rapidly to deal with the new situation, and most were not. The flour "shortage" did eventually resolve itself, but it remains a classic example of how a global crisis can impact supply chains in ways nobody predicted.

How Will Shipping Stay Changed?

So, considering these changes and crises, of varying levels, how is the shipping industry going to change permanently because of the pandemic?

Change is inevitable, but most of the changes are unlikely to stem from permanent social changes, although they might be impacted by a likely extended recession. Predicting the economy after the pandemic is a frustrating exercise and models vary widely. What is going to trigger change is the simple fact that suppliers and businesses are now much more aware of risks to their supply chain.

Things that have long been taken for granted have been shown to be far more fragile than most thought. The primary change to the shipping industry for the "new normal" of post-COVID life is most likely to be improved agility and flexibility. We will also see increased automation not just at the physical level but also at the decision-making level.

For some products, companies will seek more local suppliers, slowing (but likely not reversing) globalization. For others, companies will have "backup" suppliers that they can switch to quickly in the event of a shortage. For example, after Hurricane Maria, many goods produced in Puerto Rico became scarce due to the loss of manufacturing capacity. With an agile supply chain, companies could more rapidly switch to a source in a part of the world not affected by a local disaster.

Just-in-time may also be somewhat revisited. Retail stores may keep more of non-perishable goods, such as toilet paper and soap in stock against the next crisis. However, the infrastructure investment needed to pivot too far away from it is likely to be too great, especially while the economy is still in recovery.

What companies should learn from this is that any part of the supply chain can be disrupted at any time and that demand predictions can easily fall apart under unexpected stress. You should develop systems that improve supply chain flexibility, agility, and resilience.

About Eniture Technology

Eniture Technology specializes in helping e-Commerce merchants grow by providing useful information, digital marketing services, off-the-shelf apps that solve common problems, and custom programming services. If you're interested in accelerating the growth of your online sales, please contact us. You might also enjoy this free information on the 10 reasons why you should be using HubSpot to grow your e-commerce business.

10 Reasons Why You Should Be Using HubSpot

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