Written by Mark Perera, CEO, Vizibl
ast year, the COVID-19 pandemic changed the future of supply chains indefinitely. When compared to overall business impact, most senior leaders said their supply chain was more susceptible to disruption from COVID-19 than their workforce, systems, or operations. According to Accenture, 94% of Fortune 1000 companies experienced supply chain disruption owing to the pandemic. Amidst the ongoing impact of COVID-19, as countries move in and out of lockdowns and vaccines are rolled out, this will continue to be felt worldwide throughout 2021 and beyond as organisations look to recover from the disruption to their supply chains.
Transforming supply chain models – for good
However, the unprecedented nature of COVID-19 has forced companies, and industries, to rethink and transform their supply chain models – for good. Many are now looking at how they can move away from linear supply chains to a more holistic, robust and sustainable supplier ecosystem.
It is interesting because since humans began making and distributing products to one another, the structure of the supply chain has remained predominantly untouched. Raw materials flow in, they are changed into a product and distributed and used until finally they are thrown away. This linear – take, make, throw away – supply chain has been sufficient to keep economies churning for decades, but now organisations are seeking out more robust, more profitable, more sustainable, circular supply chain ecosystems.
Adopting a circular approach
The circular supply chain is a model that encourages manufacturers and sellers of products to take discarded materials and remake them for resale. To remain competitive and relevant linear supply chain entities must be willing to transition to a circular supply chain, which includes the entire reverse logistics process, in order to continue to grow and become sustainable in a future without an unlimited supply of resources.
The demand for some organisations to move to a circular supply chain is driven by government and limitations on what products can go to waste and what must be reclaimed. That said, consumers stand out as the key driving force towards greener and more ethical, sustainable approaches.
Additionally, COVID-19 has exposed the fragility of long-distance, international supply chains. Building-in a level of resilience will see organisations seeking to work with a much wider range of suppliers – building out that ecosystem – from global corporations to smaller, regional start-ups to ensure business continuity, diversity and circularity in the supply chain.
Building a purpose-led ecosystem
The step-change that organisations must undertake to deliver against these sustainable and circular demands is now all about building purpose-led ecosystems. This means that organisations need to move beyond looking at their supply chain in a linear way, to actively collaborating with suppliers on initiatives to improve environmental, social and economic performance. They need to move towards a purpose-led procurement approach that includes a circular supply chain, and we will see adoption accelerate in 2021.
But what do we mean by a circular supply chain?
This is based on the principles of the circular economy, which is about designing waste out, circulating materials and resources and regenerating natural systems. The underlying premise behind the circular economy is that businesses will be more sustainable, more profitable and as a result add trillions to the global economy by 2030. The idea is that they are no longer reliant on the limited natural resources they required for growth. For businesses adopting a circular economy approach to be successful, their supply chains must also support these principles. According to Deborah Dull, who leads digital product management at GE Digital for Operations Performance Management, Supply Chain, Digital Kaizen, and Circular Economy: “Ultimately the circular economy is about inventory and extending its life, reusing it, repurposing it or eliminating the need for it altogether. Supply chain is responsible for inventory, and a global, circular economy requires supply chain innovation beyond its current scope which is very linear.”
How being lean helps
Deborah advocates that organisations should move to a lean supply chain approach because this moves inventory and decisions closer to the customer. This is important because proximity reduces the time between inventory decisions and actual customer need and because more inventory is typically required to buffer against uncertainty. Decreasing the time decreases the uncertainty, which decreases the need for an oversupply of inventory. Additionally, technology and data are key. Therefore, having a supply chain collaboration and innovation technology platform in place is important to facilitate collaboration in the supply chain, build in resilience and to give that all-important visibility into demand, supply, capacity and data.
In particular, data about inventory helps organisations make the best use of their existing inventory and reuse items as many times as possible. If the organisation cannot see their inventory, or if they lack the ability to easily move it around, they often end up duplicating inventory in different locations and buying an oversupply to prevent shortages.
Resilience and responsibility – watchwords for 2021
Going forward, it is entirely feasible that similar worldwide events to COVID-19 will cause major problems for organisations getting goods and products through traditional supply chain models, that are deemed too linear and don’t take a flexible, collaborative, diverse and a circular approach. Likewise, as government regulation and legislation increase, organisations will be forced to think about circular supply chains and more ethical approaches to how they dispose of raw and waste materials.
Therefore, repurposed supply chains of the future must have resilience and responsibility at their heart. Likewise, organisations must not only accelerate their agility, but also value chain transformation to help outmanoeuvre the ongoing uncertainty we face in 2021 and beyond.