Gartner: Supply chain faces disruptive threats before COVID-19 vaccine
Gartner has identified three scenarios chief supply chain officers (CSCOs) should prepare for until a COVID-19 vaccine is developed.
A survey of 833 members of the Gartner Research Circle found that 84% of organizations are facing varying forms of COVID-19-related disruption. In response, Gartner has developed three prevaccine scenarios CSCOs can utilize in their decision-making process. A synopsis of each scenario follows.
Scenario 1: Short-term disruption
In this scenario, there is significant impact from COVID-19 in the short term, but the virus will be dealt with quickly. Eventually, restrictions are lifted, and customer confidence increases.
“This is a best-case scenario,” Sarah Watt, senior director analyst with the Gartner supply chain practice. “However, supply chain leaders shouldn’t expect an imminent return to business as usual. Supply chain organizations will not be the same after COVID-19, they will enter a new normal. During a quick recovery, understanding changes in demand, establishing supply and managing economic impacts will be crucial to the speed of recovery. Demand sensing is particularly important, as consumer sentiment is changing.”
According to Gartner analysis, a quick move into the recovery phase also creates short-term competition for logistics services. Space on planes, trucks and ocean carriers will be in high demand and result in increased costs. Gartner advises that CSCOs must work with their logistics leaders to plan ahead and prioritize shipments based on customer demand, shelf life and anticipated competitor position.
Scenario 2: Long-term disruption
This scenario describes a world in which the virus takes longer to contain, and restrictions remain in place for many months. Customer confidence declines, with a recession following.
“This is the time to radically review product portfolios and evaluate if they match with the current customer spending habits,” said Watt. “Stop low-volume and low-margin products and focus on what makes up the bulk of the organization’s revenue.”
In the long term, customer behavior and spending habits may change, as financial insecurity will increase emphasis on personal financial resilience – which may decrease spending on luxury goods. Gartner advises that consumers are likely to stick with e-commerce channels driven by concerns about physically shopping in store. CSCOs must also anticipate some suppliers may not survive the crisis due to financial insecurity.
Scenario 3: Secondary crisis
After organizations experience either the first or second scenario, it’s also a possibility that a second disruption will follow – caused by COVID-19, natural disasters or other major incidents. Therefore, Gartner recommends that CSCOs learn from the current crisis and improve their supply chain’s resilience to all forms of disruption.
“While it’s difficult to predict what a secondary crisis will look like, there are certain learnings from the current disruption that will prove helpful,” said Watt. “For example, supply chain organizations must consider the impact of the changing political landscape on their ability to move products between countries, as some are restricting the export of critical products. Medium-term forms of protectionism may mean that supply chains need to reconsider their network design and pivot toward more regionalized production.”