The world is witnessing an unprecedented challenge in the face of COVID-19. A dangerously contagious disease, the virus has infected more than 4 million and affecting the livelihoods of nearly 2.7 billion people. This uncertainty caused by the pandemic has severely impacted the global economy in the span of a few months and is expected to worsen until we find an effective vaccine for the virus. Since social distancing is the only proven solution to control the virus for now, lockdowns have become the new normal. Firms facing closures are now skeptically resuming operations in phases. People have turned to digitalization which is bringing some level of normalcy. It is a testing period for most business models. However, it is also an opportunity to make well-timed investment in digitalization of processes to reap benefits in the near future. Digitalization is enabling firms to keep their supply chains running and rethink their business models. Thus, for a sustainable business, digital transformation is the new and perpetual imperative.
China was the first nation to be hit by the virus which was then followed by a complete lockdown in the state of Wuhan, one of the major manufacturing and transportation hubs. With industry-wide supply chains being hit hard due to choked transportation routes and the shutdown of manufacturing plants, carrying out operations has become nearly impossible. The bottled water industry, which has more than a quarter of its consumption-base in China, is one sector that has been acutely hit by the lockdown. The pandemic has severely affected, both, the demand as well as the supply of bottled water. In February 2020, the beverage industry was running at 80% of the previous year’s operational capacity. Trucking capacity has dipped to as low as 60% along with significant delays in transportation. Severe labor shortage and with people quarantined at home and preferring online services, an uncertain demand side has stretched the numbers to new extremes.
Looking at the ambiguous demand and the limited resources to manufacture, companies must be highly optimized in their planning and execution. With normal planning variables becoming irrelevant, firms that fail to implement digitalization have feeble chances of survival. Scenario planning to understand how demand may change and how it can be satisfied based on current production and warehouse capacity is imperative to succeed in these uncertain times. The consumer-packaged goods industry is an example of how using data on demand history can be a leading indicator of future demand trends. Many CPG companies are using a consumption-based forecasting approach through a multi-layer casual analysis to detect demand fluctuations and improve shipping forecasts.
A close watch over the available transportation routes and probable closures of production sites becomes exceptionally essential. Having a real-time visibility of variables (such as available workforce, combined stock in hand-on shelf and warehouses, production capacities across sites, and traffic restrictions) at a granular level is necessary to make data-driven manufacturing decisions like product and site prioritization. It is this planning and strong decision-making that will lead a firm to succeed in a post-COVID world. But the journey does not end here.
The post-COVID world is going to be equally dynamic and turbulent considering the extreme climatic and geopolitical conditions. Building sustainable and resilient supply chains through digital infrastructure must be the next move. Businesses need to look comprehensively across their value chains and evaluate their current business model in order to grab low hanging fruits. These include supplier network or visibility across the supply-chain. For instance, having wider but connected supplier network across different markets will limit the effects of a disaster and keep the supplies intact. For supply chain visibility, implementing control towers for every business function will provide real-time data visibility and prescriptive insights will render better decision-making ability. Similarly, predictive modeling helps businesses in better scenario planning and to anticipate risks and prepare in advance.
This is how digital transformation helps firms to have a connected and resilient supply chain. Thus, businesses investing in their digital infrastructure with a clear goal are going to be able to manage such turbulence in the future and therefore digital adoption is a certain route toward sustainability.