Volatile Demand Calls for Digitization: Evolving the Supply Chain
The intricate supply chain for global companies connects nations together, meeting our needs around the world. With the COVID-19 pandemic, resources have been limited, skewing supply and demand models. Consequently, companies are now forced to evolve their supply chain model to better serve their customers and quickly adapt to market fluctuations.
This article explains how fluctuating demand has effected various supply chains and how adopting better technology can assist in recovering and preventing these challenges.
There is a large decrease or increase in demand, depending on the industry. For example, airline companies are struggling as the health and safety mandates continue to update. People don’t want to fly, or they simply can’t. This forces airlines and other sectors of the travel industry to reinvent themselves.
Mikko Turtiainen, VP Market Management of Finnair, stated in an interview with Cirium, “we now need to harness this technology to understand consumer behavior during a time of uncertainty. What we don’t yet know is how consumer behavior will change. This is where digital touch points and understanding what the consumer truly wants will be at the soul of developments going forwards.”
On the other hand, the demand for items such as hand sanitizer and toilet paper have skyrocketed. In a pandemic situation, the demand for the essential products increases expressively; on the other hand, the supply of the raw materials decreases considerably with a constraint of production capacity. These dual disruptions impact the production process suddenly, and the process can collapse without immediate and necessary actions (Emerald Insights).
This is why we still see empty shelves in our stores and why the purchase limits of certain items are still imposed.
Another astonishing increase in demand was e-commerce. Because stores were closed to shoppers, everyone turned to the internet to buy goods. U.S. retail e-commerce was up 44.5% YoY in Q2. Also in Q2, Walmart’s e-commerce sales were up 97% YoY and Target grew its same-day fulfillment services by 273%.
The top purchasing categories that consumers have gravitated toward during this shift are alcohol, home improvement materials, and groceries (up 16%, 14%, and 12% respectively) (ROI Revolution).
The Need for Digitization
The growing pressure for digitization has never been more apparent. COVID-19 has created a large disruption in the supply chain forcing companies to deliver faster, be more flexible, and increase accuracy. While many companies have implemented a digital process to improve the flow of their supply chain, the technology is often in early stages and does not produce optimal results.
“To get to the advanced level of integrated process optimization, the organizational setup, governance, processes, and incentives need to be aligned within and between partners in the supply chain” (McKinsey).
Investing in digital supply chain services, like Blume Digital Platform, companies are able to use a cloud platform to improve their supply chain and logistics. This simple, clean model has been able to assist companies (operating across 133 countries and counting) in optimizing its supply chain even during unpredictable times. In other words, adopting a digital model allows for more capacity and an easier flow from raw materials to the end-user.
Nigel Stacey, the managing director of Industry X.0, explains how making more investments in technology can help companies be more flexible. "The COVID-19 global crisis places extra significance on investments in technology and digital that will help build resilient supply chains, elastic workplaces, and resilient IT systems."
In conclusion, the pandemic has caused skewed forecasts and mayhem throughout the supply chain (and throughout the world for that matter). Demand has diminished for some industries and skyrocketed for others. The need for greater shipping capacity and faster production increased daily. While we are unsure of when things will dissolve into a “new normal” companies can adopt strong digital infrastructures to improve their processes to hopefully recover, and even prevent supply chain disasters.