Building supply chain resilience (SCRes) to COVID-19: insights from the automobile industry

The fast and extensive propagation of the novel COVID-19 has created immense uncertainties in demand and disruptions in global supply-chains. More than 1,1 million direct manufacturing jobs in the EU auto sector have been lost since the beginning of the sanitary crisis, describes the ACEA – European Automobile Manufacturers Association.

The raging pandemic has brought the aspirations of major automobile companies to a grinding halt and is challenging the current globalized supply chain models for Supply Chain Resiliencies (SCRes).

Sachin Kamble, Professor of Supply Chain and member of the Foresight, Innovation and Transformation Chair at EDHEC Business School, with five other professors from reputed business schools led research to acquire in-depth insights into quantifying the current impact of the COVID-19 pandemic.

The study builds on interviews with 88 automotive executives to determine the different coping strategies employed by these compagnies and the lessons drawn from them on building more resilient supply chains in the short and long term.

3 SHORT-TERM RESPONSE STRATEGIES

Mitigate operational risks by localizing Supply Sources and using advanced industry 4.0 technologies

Sourcing (and processing) are to be localized within the same region to meet the local demand and reduce supply chain integrations. Hence, the disruption risk could be contained within the area, as there is no spill-over of a risk incident from one region to another.

"One of our major weaknesses during the outbreak is the lack of real-time visibility across our supply chain. We are losing a great opportunity to support critical business decisions…" 

Develop new competences on Big Data Analytics and real-time information systems

These competences will provide real-time information on a different level of the supply chain activities to surmount all complex and uncertain challenges posed by COVID-19. Big Data Analytics can enhance supply chain predictive skills, as demonstrated in the impressive support to several firms by improving the information processing and simplifying the procurement selection process.

“through the data analysis we performed, we found that it would be better to maintain the plants running and build inventory, absorbing fixed costs and preparing for the post COVID-19” 

Better cooperation among supply chain stakeholders with a social focus

It is essential to be well-prepared for future disruption and help speed up the use of digital technologies. Most of the respondents highlighted the importance of working together and sharing common goals and information to develop coordinated strategies, nurturing quicker recovery. Focus on humanitarian and social performance across the supply chain is of great need to mitigate the risk of disruption at all levels.

"I think before a disruption; we should have built strong relationships with key suppliers at every supply chain tier… we need to collaborate with everyone and share common goals" 

The research insights also advise firms to develop long-term proactive and/or reactive SCRes response strategies to accelerate recovery for the COVID-19 outbreak.

3 REACTIVE STRATEGIES TO MANAGE IMMEDIATE DISRUPTIONS 

Ensure lifeline and transportation system

The respondents called for an urgent need for governments and firms to coordinate effectively to develop a long-term transport corridor with the neighboring countries that are not affected by such pandemics in the future. 

Use emerging technologies more efficient

Ensuring the ability to utilize digital technologies is crucial in allowing faster recovery from the disruption and reducing the supply chain's ripple effect.

Implement supply chain collaboration

The respondents emphasized the necessity for supply chains to learn to work together and share their goals and information to develop robust, coordinated strategies, fostering faster recovery.

3 PROACTIVE STRATEGIES TO PREVENT FUTURE DISRUPTIVE SITUATIONS 

Drive digital transformation

Firms in both manufacturing and service supply chains should promote the digital transformation of their processes and develop SCRes capabilities against future disruptions.

Integrated risk management

The COVID-19 outbreak has highlighted the need to involve all supply-chain nodes in creating an integrated approach to supply-chain risk management to avoid disruptions and shocks hitting their 'invisible' lower-tier suppliers.

Develop Corporate Social Responsibility

Adopting more holistic approaches that merge supply-chain resilience and Corporate Social Responsibility (CSR) practices to protect employment and employees in the workplace. Notably, manufacturing and service supply-chain actors should learn from the disastrous social effect generated by the ongoing pandemic that has disrupted millions of lives worldwide, causing tremendous human and economic losses.

This study also gives insights from 57 executives from the airline industry, if you are interested feel free to read the research paper.