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What are the Pre-Vaccine Scenarios for Supply Chain?

May 27, 2020
With 84% of organizations grappling with disruptions due to COVID-19, Gartner breaks down the top three pre-vaccine supply chain scenarios that companies should be bracing themselves for.

As scientists and researchers worldwide work around the clock to develop vaccines and treatments for COVID-19, the timeline for the commercial introduction of these remedies ranges anywhere from six months to two years, depending on whom you ask. With confirmed cases worldwide now at 4.3 million and counting, scientists are pushing forward—but definitive timelines have yet to be revealed.

With Gartner reporting that 84% of organizations are dealing with supply chain disruptions related to COVID-19, the research firm has developed three pre-vaccine scenarios meant to help chief supply chain officers (CSCOs) anticipate what the future may bring. The scenarios can also be applied to the electronics procurement space, where component shortages, factory shutdowns and myriad other disruptive forces are converging.

“As inventory buffers start to deplete and demands shift, there is even more disruption coming our way,” said Sarah Watt, senior director analyst with the Gartner Supply Chain Practice, in a press release. “While this crisis requires a fair amount of crucial day-to-day decision-making, CSCOs must start planning for a recovery and make preemptive decisions to set their organization up for success.”

Here are the three pre-vaccine scenarios that Gartner is envisioning right now, and the research firm’s best practices for navigating these uncertain waters.

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. 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’,” Watt said. “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.”

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 points out, noting that professionals must work with their logistics leaders to plan ahead and prioritize shipments based on customer demand, shelf life and anticipated competitor position.

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,” Watt said. “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. Consumers are likely to stick with ecommerce channels driven by concerns about physically shopping in store. “Financial insecurity is also something suppliers will face,” Watt said, “and some might not survive the crisis.” To deal with these scenarios, Gartner advises professionals to try to anticipate these situations, profile where suppliers may be in financial distress and then take appropriate action.

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 another major incident. This is where the “lessons learned” from the current crisis come into play and help procurement improve its 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,” Watt said. 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,” she concluded, “and pivot toward more regionalized production.”

About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.

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