Supply chains set for a two-phase transition to a new normal

DHL study indicates post-coronavirus logistics will involve adjustments to transport flows and warehouse networks, fresh impetus to digitalisation and automation initiatives, and moving from procurement by cost to procurement for resilience.

Supply chains are likely to go through a two-phase transition to a post-coronavirus ‘new normal’ that will involve adjustments to transport flows and warehouse networks, fresh impetus to digitalisation and automation initiatives, and moving from an era dominated by procurement for cost to an era marked by procurement for resilience, according to a new study.

According to the ‘Transition to a new normal’ white paper on post-corona supply chains, created by DHL and supply chain expert Richard Wilding, industries and supply chains will not be the same post-coronavirus as they were before. While today only the outlines of the exact formation of that ‘new normal’ can be seen, industries will not immediately move into a post-corona phase and return to business as usual, the report highlights.

With scientists searching diligently for a vaccine against the disease and many businesses are still managing the crisis, “any iteration of normalcy is still a distant goal”, it notes. “In the meantime, an interim phase – the pre-new normal – will bridge the gap between lockdown and the new normal.”

Obviously, some industries were hit harder by the pandemic than others and thus will recover more slowly, it notes. However, the report states that various implications for businesses, supply chains, and supply chain leaders can be subsumed under four categories: Resilience issues, Demand-related issues, Transportation & Warehousing-related issues; and Workplace-related issues.

Richard Wilding, professor of Supply Chain Strategy at Cranfield University, commented: “As in every crisis, the strengths but also the weaknesses of the system become visible. To become better, it is important to learn from such emergency situations. In the new normal, if your supply chain is the same as the one that you had pre-coronavirus, you’re probably doing something wrong.”

Two-phase transition to a ‘new normal’

On the basis of the anticipated two-phase transition to a ‘new normal’, the study notes that in a pre-new normal world, supply chains will be re-shaped to make them more resilient. “For instance, the fact that both manufacturing and warehouse locations were equally affected by regional lockdowns and varying regulations will result in more distributed manufacturing, storage, dual sourcing, re-shoring, and near-shoring in the future,” it noted.

“Instead of focusing solely on tier 1 suppliers, supply chain leaders will have to take a closer look at tier 2 and tier 3 suppliers as well to check if they are able to keep up with the flow of goods. Furthermore, the demand will be more volatile and consumer tastes may erratically fluctuate, increasing the need for flexible and alternative transportation flows and warehouse networks.”

While online shopping will be more prevalent and direct-to-consumer sales will increase, other retail channels and industries will be disrupted, the report noted, adding: “These are just some of the facets that influence modern supply chains.”

It also highlighted that configuring post‑coronavirus workplaces to meet social distancing and sanitation guidelines will also affect the work styles in both warehouses and offices.

“For remote working, information systems will need to be robust and capable of supporting a distributed workforce by providing access to appropriate data and systems,” it notes. “Warehouse processes need to be adapted to the new standards, such as one-way systems, distributed picking faces, or socially distanced packing areas. Just as procuring for resilience will become an increased focus, remote working will disrupt established processes, providing fresh impetus for digitalization and automation initiatives.”

Source: Lloyd’s