Supply chains and manufacturing
Our observations during COVID-19
- Breakdown in global supply chains as industries and countries slow or close down. For instance, the closing of Chinese auto-manufacturers, chemical plants as well as limited access to shipping and air freight logistics has caused ripple effects across the world1.
- Panic buying has seen shortages of some products across the world, including Australia, and has put substantial pressure on local supply chains.
- Some companies have responded by shifting their manufacturing processes to create in-demand products (hand sanitiser, ventilators and face masks).
Our predictions for a post-COVID-19 world
Supply chains will diversify to manage risk
The shutdown of entire industries and countries during the COVID-19 crisis has caused disruption to global supply chains that many businesses would have thought unimaginable. To avoid disruption on this scale again, companies will critically re-examine their supply chains and restructure flows and networks to build resilience and seek to avoid over-dependency on a particular country or region. This could lead to a boost to other low-cost manufacturing environments – as is already happening in countries such as Vietnam, Malaysia and Thailand – to rival China as the world’s engine room.
Local manufacturing reinvigorated
The crisis will bring back a focus on boosting local manufacturing for critical industries, further compounded by growing unemployment and consumers' desire to support local business. This will be especially true for advanced manufacturing which can supplement local operations with technology such as 3D printing, high-tech automation and robotics.
With greater use of technology to manufacture goods, intellectual property becomes a more important component in the value chain. New policies that support local R&D and moves to resolve long-term issues such as energy cost will also be needed.
Supply chains will become smarter
Disruption to trade caught many companies off-guard, exposing gaps in digital capabilities. Many organisations will use the lessons learned from this experience to analyse the failure/choke points exposed and build resilience within their supply chain networks. Moves to embed technology across supply chains will accelerate and result in a newfound agility for many industries.
AI, machine learning, predictive analytics, IoT and blockchain will be used to provide precision, enhanced visibility and transparency to supply chains and enable real-time decision-making and responsiveness. This will be critical to how companies sense, monitor and adapt to changes in customer behaviour and supply chain variability in the future.
Micro supply chains will enable flexibility to react to volatile consumer demand
To be able to meet fast-changing customer demands and expectations, more companies will evolve their operating models towards micro supply chains, with more focus on leveraging local production capacity. Their decentralised and highly flexible nature will enable companies to alter production and delivery, scale volumes, and introduce new products at short notice (even if just temporarily and in vastly different product categories). This approach will create more value by allowing organisations to be as close to the customer as possible and, in times of crisis or rapid change, to benefit greatly from their independence.
Buying behaviours around some items will remain changed
There will be a shift in buying behaviours as individuals and companies reconsider how they stock up on essential items. There will be a greater focus on keeping levels of shelf-stable foods, medical supplies, household cleaning and personal hygiene products on hand. This could see increased business model innovation in subscription and delivery models around these items.
What we need to consider
Will our values around consumption shift towards sustainability?
Localisation may lead to increased prices and perhaps also a greater connection to the products created and bought.
- Could this drive a shift away from single or short use products to a more sustainable buying culture?
- Will we see greater focus on recycling/upcycling of goods?
- Or greater sharing of more expensive/lower-use assets that are pooled in neighbourhoods via sharing economies platforms?
More predictions for a post-COVID-19 world
These themes were selected by comparing emerging trends before and during the COVID-19 pandemic. Within each theme, we engaged KPMG professionals to develop hypotheses on what a post-COVID-19 world might look like.