Deployment of 4G changed the way businesses manage their supply chain, 5G will hasten the process leading to transformational change for enterprises in general.
Over the past two years, Covid-19 has disrupted supply chains at an unprecedented scale never before witnessed in the history of global markets. Supply-demand imbalances have pushed manufacturers across the entire range of industry and enterprise to grapple with multiple challenges including rising commodity prices, logistic disruptions and shifting consumer behaviour.
Successive lockdowns imposed by various national governments across the globe have only compounded the situation and impacted manufacturing in a big way leading to huge productivity losses. International and national travel restrictions affected the movement of goods across borders considerably resulting in supply chain disruptions. Factory closures, travel bans, ports closures, and suspended transportations interrupted the entire supply network, thus leading to severe shortages and affecting productivity and revenue.
The instability and rapid changes in the business environment caused by disruption of global businesses and trades required business leaders to think differently make quick decisions and take immediate actions to sustain their operations to serve their clientele and customers while at the same time protecting the workforce. Some of these included revisiting risk management strategies, identifying new vulnerabilities, embracing digital transformation and ensuring supply chain monitoring.
At the outset, let us look at the impact of Covid-19 on supply chains worldwide, the disruptions caused and the associated challenges and the changing trends. European Management Review in late 2021, Supply Chains and the Covid-19 pandemic: A Comprehensive Framework has studied the pandemic affected supply chain activities, operations, processes, and management due to supply disruptions, demand volatility, and government actions to combat the crisis. Factory closures, border restrictions, travel bans, ports closures, and suspended transportations interrupted the entire supply network, thus leading to shortages.
Global supply chains (GSCs) connected to China, US, and Europe were greatly affected and induced spikes in many products in response to panic buying, which, in turn, led to price fluctuations, as supplies become limited. High demand and order congestions from the delays resulted in vulnerability and shocks, which impacted both offline and online purchases. Furthermore, complex challenges in addressing the massive demand while maintaining quality and continuity persisted.
Many countries acted proactively to protect its people and imposed strict restrictions on movements via lockdowns, social distancing, and quarantining measures in the early part of 2021. The tension and panic from such decisions affected supply chain operations and performance. Government measures led to a decline in production and considerable contractions in international trade flows.
Several manufacturing plants and factories suspended production. Delivery and distribution faced several challenges, including direct distribution difficulties, increased online orders, re-staffing of distribution centres and warehouses and changes in the allocation of inventory across the network and distribution channels to increase responsiveness.
According to an Accenture report, 94 percent of Fortune 1000 companies witnessed supply chain disruptions from Covid-19, 75 percent had a negative or strong negative impact on their businesses and 55 percent had to downgrade their growth outlooks. Critical challenges impinging on the supply chain include lack of global resilience and breaking down in the face of multi country disruptions, escalating costs, lack of sustainability, talent gaps across the supply chain, lack of flexibility and over-reliance on legacy technologies.
Businesses must navigate the financial and operational challenges of coronavirus while rapidly addressing the needs of their people, customers and suppliers recommended the report. By taking the right actions, supply chain leaders can turn massive complexity and supply chain disruption into meaningful change.
The situation in India was no different. Restrictions imposed by national and various State Governments disrupted supply chains, hit freight networks and caused labour shortages slowing down India’s economy. Traditional supply chain planning was thrown haywire leading to operational and financial consequences. Suppliers dealt with a host of issues like drop in demand and surge by segment, supply shortages, inventory placement challenges and reduced productivity.
The telcos are still reeling under supply chain woes.
The world was hit by a chip shortage crisis during Covid-19 affecting the production and shipment of smartphones. Critical shortage of raw material and non-availability of labour caused inordinate production delays for telcos. Industry experts believe that the supply chain environment will remain challenged at least through the second half of the year in 2022.
According to a PwC report, Covid-19 and the telecommunications industry, telcos have effectively diversified their supply chains post-Covid 19. However, some of the current disruption could result in future dips in equipment revenues. Major mobile handset suppliers have significant exposure to slowdowns in Asia. While a number of telcos are trying to stockpile inventory to mitigate impact, that approach has limitations. The manufacture and delivery of network equipment will likely be delayed, slowing 5G and fiber network builds.
Excessive demand on mobile and communications networks — including temporary suspension of data caps — could affect service quality, creating a ripple effect as companies across various sectors implement remote-work plans. Communications providers are dependent on large call center operations to perform critical functions, such as sales and customer service. The majority of retail locations are now shut down, forcing a huge spike in volume through call centers, testing their ability to adjust at scale.
Under the Make in India initiative, the Government is now looking to promote the manufacturing of semiconductors and display fabs and has offered production-linked incentive schemes. The PLI scheme, which aims to make India a telecom equipment manufacturing hub by attracting global investments as well as nurture home-grown companies, kick-started on April 1, 2021, and will be in effect till 2025-26. This will accelerate the manufacturing of telecom and networking products as well! The supply chain and logistics sector will play an important role in meeting raw material demand for Indian manufacturers.
Major challenges may be broadly summarized as:
- Covid-19 created a situation of uncertainty making it difficult for suppliers to predict where excesses and shortages occur. Suppliers need to constantly evaluate the supply chain scenarios to stay ahead of the curve.
- While certain businesses did well during Covid-19, many others saw a slump and the situation rapidly changed from time to time. Businesses had to carefully analyse demand and create micro-segmentation to survive and thrive.
- Leveraging data to improve visibility and optimize performance became the buzzword as companies started taking the digital-first approach and AI was deployed to get real time feedback from customers and maximize visibility into demand, inventory, capacity, supply and finances across the ecosystem.
- There was a critical need to rethink supply chains, make it more regional ranging from sourcing raw material to relocating production units. Companies are now increasingly being motivated to secure low-cost suppliers and look at realignment opportunities within regional markets as land, labour and logistics become increasingly competitive.
- Given the pandemic, organizations were encouraged to share more information and augment communications and visibility across the supply chain. Technologies and enabling plans and procedures helped to rebuild the supply chain system and improve its resilience in the future. Technology, digital supply chain and block chain supply were identified as priorities for the future.
Digitization of supply chains. Even before the advent of Covid-19, logistics in developed economies had started underdoing a change from a purely operational function to an independent supply chain management function. Long before the pandemic, a vision of Supply Chain 4.0 was laid out in developed economies involving the application of internet of things, cloud-based technology, the use of advanced robotics and the application of advanced analytics of big data in supply chain management for making the organization grow faster, more granular, more flexible, more accurate and more efficient.
Covid-19 has accelerated the process of supply chain digitization in markets across the globe. While markets in Europe and US had already started the process of supply chain digitization even earlier, markets with less advanced logistics especially emerging markets like Eastern Asia, Africa, Latin America and India have also started the process of transforming their logistics by establishing systems and mechanisms that captures data from across the supply chain improving forecasting and better inventory planning. Businesses can access vast amounts of data and analyse them in near real-time to accurately forecast future demand or changes in the supply chain.
In the post-Covid 19 scenario, almost every business has realized that digitization offers tremendous advantages over the traditional supply chain. Replacing manually handled data with digital data and regular updating the same has tremendous advantages as it not only gives access to real time data but also offers real time analyses with valuable insights.
For example, if the lead time of a supplier is constantly increasing, a warning can be sent out to planners making them aware and enable them to mitigate supply side disruptions at an early stage.
Another advantage of digitization is an integrated planning process, leveraging all information in a company about the various moving parts, especially those moving at slow or medium speed. This enables the suppliers to focus on the slow-moving parts and take steps to improve the same. To get the maximum out of this, the organizational set-up, governance and processes need to be aligned with those of everyone in the supply chain.
Leveraging technology for supply chain integration. Technology is the backbone of supply chain digitization. As wireless broadband technologies improve, the capacity to digitize supply chain processes also takes a leap and so does productivity and sales, as a consequence. In terms of technology, we have seen advancement from a basic handset to smartphone tablets using 3G to integration of all personal electronics – phone, TV, tablet, camera, and automobile – using 4G technology. While 3G offers limited access to cloud technology, cloud computing and multi-device access with 4G technology makes collaboration via cloud, multi-device access, real-time monitoring, control and automation a reality.
Deployment of 4G technology has changed the way businesses manage their supply chain. Before Covid-19, businesses were optimizing their supply chain by using warehouses in low-cost jurisdictions and relying on effective logistics to manage spikes. But the pandemic caused abrupt breakages forcing businesses to rethink and adopt a more resilient approach. Businesses learnt the importance of preparing for long-term uncertainty and upheaval and building resilience into their supply chains.
For many businesses, this started with fire-fighting. As supply chain problems increased, businesses had to focus on short-term day to day actions like expediting delivery services to meet demand or speeding up production by purchasing components on an emergency basis. Soon, the smarter among them realized that this was no answer to disruptions caused by big external forces like the pandemic and the changing geo-political realities due to conflict like the Ukraine-Russia war!
Creating a nerve centre to consolidate organizational responses by integrating and streamlining operations was the next best thing to do as it broke down silos and enabled cross-functional teams to come together and optimise performance. Deployment of 4G technology makes it possible for us to simulate and plan for extreme supply and demand disruptions and re-evaluate inventory strategies. This also helps businesses move towards structural resilience by anticipating potential disruptions and run simulation exercises so that potential risk reduction strategies can be deployed.
According to an April 2022 Gartner report, many supply chain technologies consider technology as a source of competitive advantage with emerging technologies as a means to address digital transformation. Supply chain technologies will be augmented by technologies that improve human decision making like embedded advance analytics, artificial intelligence and data science. Supply chain organisations should therefore unify their technology portfolio and update their legacy systems.
Gartner further says that adapting to new technology is the most important strategic change supply chain organisations will face five years from now to drive automation, intelligence and resilience. The 2022 top technology themes are hyper automation 2.0, next generation robots, autonomous things, digital chain supply twin, analytics everywhere, security mesh, ecosystem collaboration and sustainability tools.
Bridging the digital divide in supply chain links
Households in unserved or underserved areas have been hardest hit by global supply chain shortages of telecommunications equipment as operators planning new gigabit broadband networks have been unable to complete their builds. While both public and private funds are available in unprecedented quantities, many small operators have found themselves unable to secure the necessary materials from their established supply chains to meet their self-imposed schedules or regulatory-imposed milestones.
Aiming to provide enterprise customers with expanded and enriched broadband networks to reach new sites and home workers during challenging times, carriers and their vendors are reworking longstanding practices to skirt weak supply chain links. The focus is on closing the digital divide and introducing high-speed services using next-generation fiber technologies.
Carriers hope – sooner rather than later – to interest enterprises in expanding and upgrading their corporate networks to reach new offices and support work-from-home efforts as the telecom industry tires of rolling delays from supply chain issues. Investment in next-generation fiber technologies has skyrocketed over the last four years. Non-traditional acquisition processes have taken root. All in all, they are adjusting supply chain processes to aid broadband roll-outs.
Turning green, a possible solution?
Supply chain delays put additional pressure on telecoms operators who are trying to extend their connectivity to meet government targets for 5G and fibre network deployments. One solution is joining the circular economy. By reusing, repairing, refurbishing and recycling used equipment, 84 percent of global operators believe they can help solve supply chain challenges and accelerate network deployment, according to research by TXO. Over the next five years, 75 percent of operators say they’ll recycle equipment, 52 percent will be repairing equipment, 49 percent will resell it and 44 percent say they will buy refurbished equipment.
Circular economy, as a concept, emphasizes on preserving the value of products, materials, and resources for as long as possible by maximizing the product life-cycle and minimizing waste at the same time. Telcos across the world are adopting circular economy to meet their sustainability goals.
Aside from cost saving through buying refurbished equipment, operators can make additional revenue by re-selling old equipment that is no longer in use or rarely used, and so wastes power. This approach enables them to significantly reduce their CapEx by offsetting revenue generated against purchases of new equipment. OpEx can also be reduced by eliminating warehousing costs of obsolete inventory.
If adapting to technology is the main challenge for supply chain organizations, the penetration of 5G will hasten the process leading to transformational change for enterprises in general. Truly, 5G is a data bullet train that has the power to create a strong digital India where limitless connectivity would mean limitless possibility – where supply chain augmentation will not just be focused on improving logistical operations. Rather, it can create and transform businesses based on customer’s needs, drive new ideas and networks and bring in a vast array of consumers into the market fold by creating products and processes that matter to them. Giving customers what they need and with speed can truly make India’s economy a global one truly enabling our vision of Vasudaiva Kutumbakam, The World is One Family.