Consultant Insight: Supply chains must be agile and resilient when facing challenges

COVID-19-related lockdowns and Russia’s invasion of Ukraine are the latest in a host of challenges and disruptions that supply chains have faced over the years. Supply chain challenges arising from the COVID-19 pandemic and Russia’s invasion of Ukraine are estimated to result in a potential cumulative loss of 920 billion euros to gross domestic product (GDP) across the Eurozone by 2023, equating to 7.7% of the Eurozone GDP in 2023, according to a recently published report from consulting firm Accenture. Supply chain disruptions related to COVID-19 cost Eurozone economies 112.7 billion euros in lost GDP in 2021, the report estimates. [caption id="attachment_69752" align="alignright" width="413"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] “Before the war, the lack of material supplies, breakdowns in logistics and inflationary pressures were already undermining the economic rebound in Europe, with resurging demand and precautionary hoarding overwhelming supply chains,” according to Accenture. “Although expert consensus is that Europe will avoid recession this year, the combination of COVID-19 and the war in Ukraine has the potential to significantly impact Europe’s economy, causing a material deceleration in growth,” Jean-Marc Ollagnier, CEO of Accenture Europe, noted in the report. “While before the war some kind of supply chain normalization was expected in the second half of 2022, we now don’t expect this to happen before 2023, perhaps not even until 2024, depending on how the war evolves.” Reinvention is key A reinvention of supply chains is required to address a paradigm shift, Accenture suggests. While supply chains were originally designed to optimize costs in today’s world, they must also be resilient and agile to respond to increasing supply uncertainties, according to the report. This “reinvention of supply chains” has been discussed in numerous publications for years. However, now the right technology exists to provide resilience, agility and relevance to supply chains. The most important supply chain lesson that shippers and partners have learned over the past couple of years has been the need for resiliency. Those that have been able to anticipate and quickly recover from disruptions such as port congestion, rising transportation rates and capacity constraints thus far are the ones that have benefited financially and strengthened their customer relationships. Sixty percent of supply chain executives surveyed by technology research firm Gartner admitted their supply chains have not been designed for resilience but for cost efficiency, while 87% of respondents noted they plan to make investments in supply chain resiliency. Tech investment for resiliency The first step in achieving resiliency is investing in cloud computing, which is defined as “a style of computing in which scalable and elastic IT-enabled capabilities are delivered as a service using internet technologies,” according to Gartner. Investments in cloud computing accelerated over the past two years as businesses increased their spending on digital transformation plans during the pandemic. The lockdowns throughout the pandemic showed companies how important it was to be able to access their computing infrastructure, applications and data from wherever their staff was working and not just from an office. As the pandemic eases, Gartner expects that as much as half of spending across application software, infrastructure software, business process services and system infrastructure markets will have shifted to the cloud by 2025, up from 41% in 2022. In addition, almost two-thirds of spending on application software will be via cloud computing, up from 57.7% in 2022, Gartner estimates. Meanwhile, rethinking the supply chain will be necessary as the world emerges from the pandemic only to face the effects of the war in Ukraine. “The war in Ukraine will have a significant impact, increasing the amount and duration of disruptions,” said Michael Brueckner, chief strategy officer for Accenture Europe. “The severity will depend on how the war evolves, but nothing short of reinvention is required, as a new economic order takes shape amid an inflationary environment, increased regionalization, the [clean] energy transition and a tight talent market. Improving energy efficiency and speeding up the transition to green energy sources will be critical to achieving security. “And the ability to attract, retain, reskill and upskill people is becoming one of the most pressing issues this decade,” Brueckner added. The Air Cargo Tech Summit, the new airfreight logistics event presented by Air Cargo World , will take place LIVE in Miami from June 6-7. Learn more and register here.

Consultant Insight: Supply chains must be agile and resilient when facing challenges

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