COVID-19 restrictions have challenged manufacturing worldwide. To stay competitive, companies must adapt to new technologies and strategies to survive in the post-COVID world.
What’s covered in this article:
Supply chain adaptations for success
Retailer success story: Zara
Within the last year, manufacturers have had to cope with supply chain disruptions and the shutdown of factories due to restrictions caused by COVID-19. Companies with agile supply chains have handled the market fluctuations better than others. Manufacturers adapted to the technologies of Industry 4.0, and with suppliers nearby, could handle demand and high shipping rates more efficiently.
Returning to a pre-COVID situation is not very probable due to shifted consumption patterns and the increasing demand in e-commerce. Manufacturers must ask themselves how they can maintain their business after the crisis ends and successfully adjust to the new situation.
COVID-19 — Impacts And Challenges For The Manufacturer
When COVID-19 struck in the first quarter of last year, virtually every global industry witnessed a seismic impact. With mandatory closures ordered for production plants, manufacturers had to adapt quickly to a new reality.
At the beginning of the crisis, China was the most affected manufacturing hub worldwide. An immediate supply chain disruption resulted from closed facilities and a higher demand than production could handle. Like many major companies with manufacturing facilities in China, receding supplies of components and commodities forced the U.S. and European companies to decrease or even stop production. This situation affected sectors such as the automotive industry, medical supplies, and electronics.
Increasing lead times, costs, and delays resulted in significant problems together with port congestion, capacity availability, and container shortage.
While China recovered its economy fast, a shifted consumption pattern to e-commerce presented new challenges to the industry. An ever-increasing B2C model of e-commerce delivery and spiking imports from China to restock inventories quickly led to a freight capacity shortage. This resulted in surging rates across all modalities. As the demand increased over the last months, supply chain disruption became a more significant issue that manufacturers had to address. Increasing lead times, costs, and delays resulted in significant problems together with port congestion, capacity availability, and container shortage.
Most manufacturers attempted to maintain production levels and anticipate returning to the “old normal”. The increased costs for seeking alternative suppliers or higher shipping costs were often reflected in the price passed along to the customers.
Manufacturers are forced to adapt to the new reality of a volatile market
Over a year into the pandemic, the continuing global uncertainty proves that a return to pre-Covid times seems unlikely. Manufacturers are forced to adapt to the new reality of a volatile market. The survival of companies would now be linked to how well they can adapt their production lines to suit evolving demand.
How Industry 4.0 Can Impact Your Business
As the impact of Covid-19 continues to wane, more profound and complex issues have come to light. Growing concerns of the post-pandemic situation became noticeable with the volatility of the market. Being a crucial part of the supply chain, manufacturers need to address fluctuations and uncertainty through digitalization. According to a survey from McKinsey, 39% of industry leaders are enhancing industry 4.0 technologies by implementing a control tower approach to increase end-to-end visibility within their supply chain.
Automation, advanced manufacturing technologies, and data digitization are cornerstones to optimize internal business operations to increase time and cost-efficiency. However, gaining visibility within the supply chain allows for predictive planning and the flexibility to respond to the volatile market.
2. Dynamic Management
Traditional forecasting relies on statistical tools and a divided team, addressing demand forecasting, production planning, and sales and operation planning separately. COVID-19 forced the industry to end traditional workflows, as reliable production management can now only work dynamically using AI, machine learning, and data streamlining.
3. Advanced Technology
Incorporating modern technologies allows manufacturers to enhance the entire value chain and react to changing demands and customer needs through advanced analytical tools and real-time data.
Zara As An Inspiration — Post-Pandemic Future For Manufactures
One of the most resilient companies within the crisis was the fashion retailer Zara. Zara’s highly responsive supply chain is the main reason for its business success. Even during the pandemic, Zara withstood supply chain disruption while many of its competitors were hit strongly by the crises. Pablo Isla, the chairman of Zara’s parent company Inditex, explained that the company’s proximity sourcing, and a highly optimized supply chain handled the crisis successfully.
Zara carries 11,000 different items to thousands of its stores worldwide. The center point of the company is the so-called “Cube,” a highly automated distribution center from where all operations are managed. The strategic positioning of the stores close to town centers and short production runs has resulted in lesser excess of inventory. The company stipulates inventory turns 12 times a year and order placement twice a week, resulting in shorter order cycles that enables a very accurate forecast.
Zara’s upstream and downstream operations are highly optimized and efficient. The company purchases raw material from suppliers in Italy, Spain, Portugal, and Greece. They are transported by trucks, ensuring that they contain the effects of supply chain disruption at the onset of the crisis. Zara’s agile supply chain relies on trucking and air freight, while compensating their shipping rates by waiving off the high costs for advertisement.
Optimizing business operations and adapting to an unstable market situation is possible through digitalization and clever sourcing processes.
Zara makes it clear that optimizing business operations and adapting to an unstable market situation is possible through digitalization and clever sourcing processes. Visibility and transparency are crucial when it comes to forecasting demand and meeting customers’ expectations. To stay competitive in the post-pandemic world, manufacturers will need to adapt to these new requirements, review suppliers and proximity sourcing and reconsider internal and external business operations and practices. 3PL providers such as BlueGrace can help manufacturers to gain more visibility within their supply chain, streamlining and analyzing data to keep up in a very competitive market.