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The cyclical impact of supply chain disruptions

Jennifer Seguin
Jennifer Seguin
June 24, 2022
5 min read

Note on the authors

Heiner Murmann is the founder and CEO of Orkestra SCS, a logistics, technology and services company. In addition, Heiner serves as Executive Chairman for Evolution Time Critical and President of The Five Inc., and as an Advisory Board Member for both Metro Supply Chain Group and Black & McDonald Limited. Notably, Heiner previously held various senior executive roles at DB Schenker, one of the top three global logistics companies, as a Member of the Board of Management responsible for Air and Ocean Freight, and as CEO of the Region Americas.

Arnold da Silva, Senior Ocean Freight Advisor for Orkestra SCS, is head of an ocean freight consulting company where he actively advises global shippers on ocean freight strategy and execution. With 40 years of experience in the ocean freight industry, Arnold served as Executive Vice President for Ocean Freight Region Americas for DB Schenker. Arnold's passion is to conceptualize and implement innovative ocean freight solutions that transform one’s supply chain and promote a shipper's success.

The COVID-19 pandemic has exposed vulnerabilities and has impacted supply chains globally. This geo-economic crisis is not a once in a lifetime event, where data trends demonstrate that production disruptions by external threats recur annually from natural disasters, cyberattacks, and multipolar economic systems. Through survey insights published by McKinsey & Co. in July and August 2020, research demonstrates that significant supply chain disruptions occur approximately every 3.7 years and last an average of +30 days. Such disruptions represent a -45% financial loss in annual profits which stunts the labour market and leads to critical goods shortages. To build a culture of resilience that can weather such an impact, it is imperative to transition internal processes from page to tablet and use AI technology company-wide.

Future-proof the supply chain  

Based on a survey by McKinsey & Co. (July 2020), 90% of executive supply chain leaders from various industries recognize the immediate need to transition their business model to a digital platform that adapts their supply chain network for a globally codependent market. By upgrading technology, companies build strategies to work with the cyclical nature of supply chain disruptors.

Necessity is the mother of digital innovation  

Traditionally, delays in mass corporate digital adoption are halted due to funding or governance. However, it is apparent that most corporations cannot revert to pre-COVID-19 business practices. At minimum, an enterprise must adjust their business model to serve sustainable environmental practices within an equitable and diverse workforce. By evolving with a digital consumer economy, organizations are rich with highly curated data that uncovers critical insight into a holistic supplier-consumer network. Cloud software that analyzes and reacts to this data ecosystem in real-time is a major win for supply chains to build resilient practices for operational and financial longevity.  

Invest in change

In devising a change management strategy, McKinsey & Co. Identifies five investment areas.

1. Agile operations

Transition to a digital model with software that provides real-time insights for all facets of the supply chain. With innovative and intuitive technology, sub-tier mapping is a key tool to achieve overall cost and risk reduction for improved lead time and consumer experiences. This depth of visibility enables decision makers to build a supply chain that considers all stakeholders, raw materials and external factors (such as tariffs and transportation delays) to ensure leaders approve the most efficient best practices.  

2. Risk management  

Develop a sound contingency plan that supports siloed teams with tools to enhance overall efficiency through a digital catalogue of concrete data and analytics.AI and machine learning propel the business to the next level with proactive automation for a seamless supply chain.  

3. Rescale the global value chain  

Regional suppliers and warehouses support the just-in-time inventory model which relies on rapid consumer demand. Transition to a cloud-based AI platform to better anticipate the buying behaviour of the end-customer and to align raw material orders with production schedules. Digital network mapping provides further insight for export activity across geographies and includes timely notifications of travel and government restrictions to avoid schedule delays and unexpected costs.  

4. Automate and up-skill the workforce  

Realize new ways to engage and broaden the workforce: up-skill employees for digital fluency and critical thinking, leverage a global marketplace saturated with talented executives, and integrate a sophisticated supply chain software to upgrade the company’s sales and operations.  

5. Sustainable globalization

Consumer spending habits demonstrate a low tolerance for corporations with a poor ethical reputation. Sustainable globalization also helps executives make sound judgements early in the supply chain network by providing a 360 ̊ view of the holistic ecosystem to neutralize the carbon footprint, create substantial benefits for the consumer experience, and improve the company’s longevity.

Optimize big data, AI and machine learning on the cloud

Data and technology are the key tools that identify trends in how major and minor disruptors consistently impact the world. In every country, contemporaries recognize the need to digitally transform business operations to solidify a cohesive network of suppliers and engaged customers. As the climate crisis evolves, it is apparent that leaders must transition their companies into this next generation of the global economy. Serve the best interests of the company, stakeholders and environment by partnering with a trusted expert consultant who guides you through this evolution to cloud-based software which activates global interconnectivity across all facets of the supply chain network.