Supply Chain Resilience After COVID-19: What Boards Should Be Thinking About Now
The rapid spread of COVID-19 continues to wreak havoc on companies’ supply chains. Many companies have gotten through the fast triage and crisis management stage of pandemic response and are now working through mitigation efforts.
No matter where your company is, your board needs to understand what management is doing to plan for the recovery stage. Your board will want to understand what the future of society, business, and the economy will look like so that the company can be resilient going forward.
The COVID-19 crisis is impacting companies in different ways. Some companies are struggling to survive, while others will come out ahead. The competitive landscape will be different going forward as a result, which may mean changes to marketing, sales, and pricing. Customers will have different interests and needs, which will mean rethinking what products and services to offer.
Management needs to step back and think about how to retool and strengthen the company’s supply chain, in particular focusing on where they were caught off guard in this pandemic and could not mitigate the impact fast enough. The board then needs to understand how the company will be prepared for a new operating environment and the changes that need to be made.
Ramping Up for Recovery
Many companies are starting to model recovery scenarios to ensure they have the right set of options to match supply and demand. They are setting up recovery planning teams to model time-based scenarios that consider the changing landscape and what management wants the company to look like going forward by product, market, and operation. They need to think, for example, about whether to launch or delay new products and service offerings that had previously been scheduled. They also need to decide how to shift the workforce to focus on areas that are critical to the company’s recovery.
These recovery planning teams should directly connect to the crisis management team so they can pressure-test how those decisions would impact the company’s ability to recover quickly and what policies, plans, or tools need to be in place to better position the company for a longer recovery. Your board should understand the recovery planning efforts and how they align with published Centers for Disease Control and Prevention phase guidelines for reopening businesses in an effort to ensure compliance and the health and safety of relevant stakeholders.
Looking Forward to Rejuvenation and Resilience
Companies will need to critically challenge their operating models—and the sooner, the better. The pandemic’s severe and swift impact follows last year’s tariff wars, new global trade agreements, and natural disasters, which have also caused disruption. Boards should ask management to do a full reset of the company’s strengths, weaknesses, opportunities, and threats, for example, so that they can set up an agile and resilient supply chain for the future.
Examples of activities companies should consider to help rejuvenate their business and create resilience in their supply chains include:
Invest in technology. Technologies like artificial intelligence, advanced analytics, and machine learning will help improve insight, visibility, and speed into and of the supply chain.
Take a fresh look at contracts, suppliers, and customers. Rework contract terms with suppliers and customers to better position collaboration, flexible cost management, and liability limitations, as well as to better align with insurance coverage.
Assess the players in the value chain. Analyze where value-add activity occurs (internally or outsourced) across all functions to determine what the company should control in-house and where to have alternate or multiple suppliers.
Think through new ways to sell, install, and service goods. Plan different ways to provide service offerings that are less dependent on travel or in-person work to enable more agility.
Identify options. Challenge the design of what is offered for sale, including country of origin for direct material and capacity; focus on the ability to manufacture or assemble products in more than one location to prevent or limit dependencies.
No one knows whether the current changes will be temporary, long term, or permanent. In any case, the supply chain should be a topic of discussion in the boardroom. Your board will want to understand how the company is rethinking its supply chain to help position the business to be fit for growth in what will most certainly be a changed landscape.
Paula Loop leads the Governance Insights Center at PwC.
Kevin Keegan is a principal at PwC.