How coronavirus is challenging the supply chain
In a modern-day update to the proverb, “Necessity is the mother of invention,” one could now say that “Necessity is the mother of acceleration.” As the world adjusts to life during the COVID-19 pandemic, we are seeing a marked acceleration in the adoption or improvement of supply chain innovations, and an opportunity to address some pain points that had been lower on the priority list for many industries.
By some estimates, we’re already seeing, or will see, accelerated adoption of some trends to take place in a mere 10 weeks when they could have otherwise taken 10 years. Some trends, and the changes they bring, will stick.
Others may change processes or behaviors temporarily to solve for the ‘here and now,’ but will provide an opportunity for businesses to innovate or improve on longer-term solutions that will yield productivity, efficiency and customer service well beyond the pandemic.
There are a multitude of supply chain opportunities the pandemic has magnified or highlighted, and many more that will become clear in the not too distant future. Several prominent acceleration needs have emerged and persisted already, and suppliers, manufacturers and distributors in a myriad of sectors should consider these opportunities for ways to drive business success and real estate solutions forward in this challenging time.
Fast Forward Trends
Meeting the customer where they are through online shopping
Whether driven by ‘shelter in place’ mandates across the globe, current consumer sentiment around venturing out into stores, or constraints around the number of shoppers allowed in stores for social distancing, online shopping has seen a dramatic increase in recent weeks, especially for categories like grocery, that were finding their way to customer adoption before the pandemic. Consumers are challenging companies to step up their digital capabilities, and to answer diverse needs for delivery of orders, ranging from traditional ‘at-home’ parcel delivery to curbside pick-up to contactless delivery of perishable goods, and everything in between. The lines between how the customer shops in-store and via direct distribution are increasingly blurred, and successful companies will find new ways to leverage processes, diversify building and space types, and inventories for a seamless customer experience.
Revisiting the inventory challenge
Setting aside ‘panic buying’ of certain food items, toilet paper and cleaning products, the pandemic is raising questions and challenges around managing inventories. Beyond the immediate actions to sell through current seasonal inventories online, sometimes using closed stores as distribution points for ‘ship from store,’ retailers and manufacturers are already contemplating longer-term changes to inventory ‘days of supply’ to avoid disruptions wrought by upstream supply chain points being shuttered or severely reduced in production capacity. Just-in-time inventory management may need new buffers throughout the supply chain, and some sectors are considering supply chain diversity to rebalance their reliance on some geographies, especially those with longer transit times.
Leveraging robotics and autonomous vehicles
While a potentially expensive solution, COVID-19 may act as an accelerator to many efforts already underway in this space. Robotics in the warehouse may help limit contact among team members receiving goods, picking orders and shipping them out. Autonomous vehicles may help to offset driver shortages to meet the increased demand for shipments to consumers, and to expedite the shipment of critical goods to rural or remote geographies with fewer transit options and with immunocompromised populations. As an example, Automatic Guided Vehicles (AGVs), which are portable robots used to transport heavy materials around large industrial buildings, will be especially important to operators worldwide in a wide range of industries such as manufacturing and product assembly, military and defense, aerospace, warehouse, material handling, food and beverage, automotive assembly, plastics and metal, and goods packaging. AGVs can be used to improve workflow, lower costs or carry out specific tasks like product and pallets loading or unloading, assembling parts, moving materials between conveyor belts and towing equipment. Using AGVs will help provide a social distance solution in industrial facilities and further accelerate the robotics trend that had begun to emerge across the globe over the past several years.
Implementing contactless 'everything'
Concerns over virus transmissions through contact proximity or touching of common surfaces has already changed the customer delivery experience, with food delivery dropped at the front door using the ‘contactless’ option, and no interaction with the person delivering. COVID-19 has amplified awareness of other needs for contactless technology far beyond payment and delivery solutions used by sellers and consumers. Both optical and voice-enabled technology, automation, and robotics will find new adopters in warehouse MHE (material handling equipment), order pick technology, and shipping/receiving processes.
Depending on data centers
The pandemic has boosted demand for many online services – like Microsoft Teams, Zoom or Hangouts - as tools for video collaboration. As we move to using new social distancing practices in the workplace, technologies that provide safer meeting solutions and alternatives to travel are becoming increasingly in demand. Google, for example, operates one of the world’s largest digital infrastructure platforms, with 19 data center campuses around the globe, including 11 in the United States, five in Europe, two in Asia Pacific and one in South America. Their cloud campuses house multiple buildings, each approximately twice the size of a big-box retail facility and filled with servers and storage to manage data. Companies’ data centers will continue to expand as the need for digital data storage grows, especially with the introduction of 5G infrastructure. To find out more, read our article "5G is here. Why it matters and how it will play a part in a post-COVID-19 world".
Exploring cold storage and food processing solutions
One of the most active property types in industrial real estate is cold storage. With online grocery more popular than ever before, restaurants and farmers forced to adjust their food supply chain, and the shutdown of processing plants despite being “essential,” the need for cold storage warehouse space is growing like never before. China, the UK and the U.S. are all seeing companies looking for new cold storage warehouses, opportunities to expand their existing space, infill properties to better serve eCommerce consumer needs, or ways to modernize facilities to make their supply chains more adaptable. This is also making investment opportunities on cold storage facilities extremely appealing.
One thing that has become clear over the past several months of the COVID-19 crisis is a general lack of connectivity and data exchange built into our global supply chains. As the need to optimize supply chains becomes more vital, there are few better solutions to helping speed up processes than implementing blockchain into a company's network. Suppliers can use blockchain to record the origins of materials that they have purchased, and track them around the world. Some of these excellent and timely examples of there are pharmaceuticals and Personal Protective Equipment (PPE). Globally, blockchain is supporting efforts to combat the virus. This technology can help ship medicine and PPE globally to areas of the world most affected by COVID-19. This time last year, Deloitte surveyed 1,000 companies across seven countries about integrating blockchain into their business operations. Their survey found that 34 percent already had a blockchain system in production today, while another 41 percent expected to deploy a blockchain application within the next 12 months. In addition, nearly 40 percent of the surveyed companies reported they would invest $5 million* or more in blockchain in the coming year. It is safe to assume, with the pandemic shaking up the supply chain, these numbers are likely to increase because the more information about every firm in the chain, the better. Being in touch with a customer's customer, you can see ahead of time what's coming your way and start finding alternative suppliers if needed.
The Way Forward
This pandemic has challenged businesses and leaders to quickly respond to critical needs, and to ensure supply chains have the raw materials and finished goods to support manufacturing, distribution, and, ultimately, the consumer, for priority needs. In the process, it has pushed innovation and solutions forward quickly. Companies and leaders can take the following steps to navigate the path ahead.
LOOK AND LISTENAssess the business for continuous improvement in process and protocols; hear what employees, suppliers and customers are asking for; and innovate to deliver those needs.
LEARNScan the landscape to see how processes and innovations in other sectors and industries may be applied to the business. Where possible, pilot or test solutions for iterative improvement with quick feedback from users.
LEADCommunicate, communicate, communicate. Instill confidence in the team to innovate and provide feedback. Encourage teams to collaborate, and course-correct when evidence of silos is found.
The pandemic is a unique event, and moment in time, for supply chain innovators and operators to survey the landscape; learn from consumers, partners, and other industries; and to install new practices, processes and products that will differentiate their business for the future. Partnerships among the supply chain, inventory management, human resources, store operations, finance and information technology teams within an organization, and across external partners used, will be a competitive advantage to moving quickly.
*All currency amounts listed in USD