Introduction
The supply chain management concept has been fundamental to business operations for many years. It involves coordinating and managing the flow of goods, services, and information from suppliers to customers. However, the COVID-19 Pandemic has significantly disrupted the standard supply chain management models, presenting unprecedented challenges for businesses globally. As such, it is necessary to understand how the Pandemic has impacted the supply chain landscape and how businesses can adapt their operations to survive these challenging times.
Problem Statement:
The COVID-19 Pandemic has disrupted the global economy, leading to widespread economic shocks and supply chain disruptions. The Pandemic has exposed the vulnerabilities of traditional supply chain management models, highlighting the need for more flexible and adaptable approaches. As such, there is a need to explore the impact of the Pandemic on the supply chain landscape and identify new approaches that can help businesses navigate these challenging times.
Research Aim and Objectives:
- To review the standard theories and models of supply chain management and lean management.
- To examine the impact of the COVID-19 Pandemic on the supply chain landscape, including the challenges and opportunities presented.
- To identify new approaches and strategies businesses can adopt to improve their supply chain resilience and adaptability.
- To demonstrate the ability to apply theories in the discussion of real-life examples and to provide practical recommendations for businesses seeking to adapt to the new supply chain landscape.
Literature Review
COVID-19 has had the most catastrophic effect on supply chains recently, causing one of the worst disruptions in human history (Ivanov & Dolgui, 2020). Its disruptions have spread throughout entire supply chain systems, with disastrous implications. It has caused a rippling impact in numerous parts of the supply chain. Several studies have found that minor disturbances in supply networks cause adverse effects. Nevertheless, the COVID-19 Pandemic has been significantly worse than any prior outbreak, disrupting supply, demand, and logistics (Singh et al., 2020).
Supply Chain and Lean Management.
The conventional supply chain management models are founded on lean management, which prioritizes the reduction of wastage and the maximization of efficacy. The models employed in contemporary business operations emphasize optimizing cost reduction, inventory management, and timely delivery of goods and services. These factors are widely acknowledged as critical components of effective business management. The Pandemic has brought to light the shortcomings of these models, particularly concerning the resilience and adaptability of supply chains. The COVID-19 outbreak has highlighted the weaknesses of conventional supply chain management frameworks, particularly regarding supply chain interruptions, inventory control, and risk mitigation Kumar (2020). The argument put forth by the authors is that businesses must embrace flexible and adaptable supply chain management methods, which entail the creation of risk management plans and the incorporation of digital technologies.
Digitalization:
Digital transformation has been recognized as a vital element of supply chain resilience during the COVID-19 Pandemic. Ivanov’s (2020) study reveals that the Pandemic has expedited the integration of digital technologies, specifically in e-commerce, electronic payments, and data analytics. Digitalization can enhance supply chain resilience for businesses by enabling real-time data, improving supply chain visibility, and optimizing logistics operations for incredible speed and efficiency.
Consumer Behavior:
The COVID-19 Pandemic has also significantly impacted consumer behavior, particularly online shopping, and home delivery. The outbreak of the Pandemic has resulted in a remarkable surge in online shopping and doorstep delivery, as people are trying to reduce their chances of contracting the virus. According to the authors, businesses must adjust to evolving consumer preferences by allocating resources toward e-commerce platforms, bolstering logistics capabilities, and enhancing supply chain agility.
International Trade Theories:
The COVID-19 Pandemic has also significantly impacted international trade, particularly in terms of global supply chain disruptions and the rise of protectionist policies. The ongoing Pandemic has resulted in a substantial decrease in worldwide trade. The economic shocks caused by supply chain interruptions and border closures have been significant. According to the authors, businesses must adjust to the evolving trade patterns by broadening their supply chains, enhancing local production capabilities, and fortifying themselves against potential disruptions.
Stakeholder theory places significant emphasis on considering all stakeholders’ interests in business decision-making. These stakeholders may include suppliers, customers, employees, and communities. The COVID-19 Pandemic has brought to light the significance of stakeholder theory in supply chain management, specifically in risk management and social responsibility. Betti and Ni’s (2020) research states that businesses must implement a stakeholder-centric strategy toward supply chain management. This involves prioritizing establishing enduring relationships with suppliers and customers, advocating ethical practices, and positively impacting the local communities.
Mitigation strategies
The COVID-19 Pandemic has underscored the perils associated with excessive dependence on a solitary supplier or nation, emphasizing the need to diversify supply chains. In order to address these potential hazards, commercial entities have initiated a strategy of supply chain diversification, whereby they procure materials and components from various suppliers and nations (WTO, 2021). The findings of Kumar’s (2020) research suggest that supply chain diversification can be an effective strategy for mitigating the effects of supply chain disruptions, enhancing supplier relationships, and augmenting supply chain adaptability.
Digital technologies in the realm of supply chain management include the implementation of data analytics, artificial intelligence, and blockchain technology. The digitalization process can enhance supply chain visibility, augment collaboration among supply chain partners, and optimize the velocity and efficacy of logistics operations. Araz et al. (2020) conducted a study that suggests that implementing digitalization can enhance the agility and efficacy of businesses in responding to supply chain disruptions, thereby mitigating the adverse effects of the Pandemic on their operations.
Significance of local production capacities in safeguarding the resilience of supply chains, in response to the Pandemic’s impact on supply chains, businesses have invested in local production capabilities. These investments include the establishment of new manufacturing facilities and the adoption of local sourcing strategies. Betti and Ni (2020) posit that local production investment can serve as a viable strategy for businesses to mitigate their dependence on global supply chains, enhance the expediency and efficacy of logistics operations, and bolster the resilience of their supply chains.
Mitigating the Pandemic’s impact on global supply chains is contingent upon the efficacy of collaboration among supply chain partners. In order to enhance collaborative efforts, commercial enterprises have recently implemented novel communication and collaboration tactics, such as virtual meetings, the implementation of collaborative planning procedures, and the exchange of information and resources (Shih, 2020). Shih (2020) has posited that effective collaboration can mitigate the impact of supply chain disruptions, enhance supply chain flexibility, and augment business risk management capabilities.
Case Study; Nike company
Nike Inc. is a multinational corporation headquartered in the United States that specializes in the production of sports equipment and the marketing and sales of footwear, accessories, apparel, and related products. The organization’s corporate headquarters is situated close to Beaverton, Oregon. Blue Ribbon Sports was established in 1964 by Bill Bowerman and Phil Knight. Nike, Inc. was formally recognized as a corporate entity on May 30th, 1971. The corporation provides sponsorship not only to renowned athletes but also to numerous sports teams across the globe. The organization is currently developing and maintaining its widely acknowledged brand identity, “Just Do It” (Nike, 2021).
Nike has established distribution channels and retail locations in over 170 nations. At present, the organization has a workforce of over 44,000 individuals globally. According to Nike (2021), the brand was appraised at $19 billion in 2014, making it the most valuable brand in the sports industry. The corporation primarily focuses on developing athletic footwear intended primarily for athletes. However, most of its merchandise is commonly utilized for casual purposes. In addition to footwear, the corporation distributes various commodities such as electronic gadgets, hand coverings, golf equipment, luggage, chronometers, and numerous other items.
The corporation experienced significant growth due to its practical organizational framework, adept supply chain management, astute marketing tactics, and well-designed training initiatives (The Editors of Encyclopaedia Britannica, 2019). Similar to numerous other corporations, Nike encountered setbacks in various aspects. The COVID-19 Pandemic significantly impacted Nike’s distribution, logistics operations, and third-party manufacturing. According to the July 2020 annual report, the net income experienced a 40% decrease before tax imposition, compared to the $2.9 billion of the previous year. As a result of the ongoing Pandemic, the corporation was compelled to close a significant number of its retail establishments worldwide (Riley, 2021). The inventory witnessed a 31% surge, reaching a value of $7.4 billion, in contrast to its value of $5.6 billion after the fiscal year 2019. The company experienced reduced shipments to wholesalers, a shortage of labor, and other supply chain disruptions. These factors negatively impacted the company’s ability to meet supply and demand, resulting in increased costs for production and distribution (Nike, 2021).
In response to the critical phase of the Pandemic, the company devised a plan to broaden its digital strategy and prioritize direct online sales. The company’s performance exhibited a significant increase. According to Nike’s 2021 report, the Nike Brand Digital channel experienced a significant growth rate of 79% on a currency objective basis, making it the fastest-growing channel. The company employed various strategies to manage inventory, including canceling factory orders, repurposing products to fulfill online orders for physical stores, and implementing substantial price reductions. The COVID-19 Pandemic has increased expenses related to unfulfilled purchase orders, leading to a rise in inventory obsolescence (Pacheco, 2021). Reduced wholesale shipments led to a broader distribution of supply chain costs, resulting in a significant decline in profit margins.
The corporation endeavored to enhance its delivery process by implementing a more agile supply chain infrastructure that brings the merchandise closer to the end-users. During the Pandemic, the organization depended on radio-frequency identification technology (RFID) (Pacheco, 2021). Radio Frequency Identification (RFID) technology employs miniature radio components embedded in labels to identify and track footwear and apparel automatically. According to a report by CNBC in 2021, the company successfully tracked one billion units with a readability rate of 99.9% during supply chain disruptions (Adamek, 2022). The company aims to reduce inventory and transportation costs by implementing RFID technology. This strategy leverages the data acquired through the company’s acquisition in 2019. By implementing this strategy, the organization could gain a competitive edge in its supply chain by leveraging predictive demand forecasting and optimizing inventory placement to facilitate efficient and timely delivery to customers. The potential for additional benefits to be gained by the strategic wholesalers of the company is suggested by recent reporting from CNBC (2021), which posits that such benefits could accrue over time.
Therefore, it can be asserted that Nike, a company that caters to consumers, altered its supply chains amidst the Pandemic to accommodate its customers confined to their homes due to the closure of their workplaces and educational institutions. The organization employed the Slack platform integrated within their supply chain operations, in conjunction with pre-existing information technology investments, to facilitate tracking their constituent components, raw materials, and final goods (Nike, 2021a). The corporation disclosed that its personnel exhibited exceptional performance amidst the Pandemic. The organization has implemented measures to reduce expenses or accelerate investments in artificial intelligence.
Conclusion
The current Pandemic represents a significant disruption of unprecedented magnitude within the lean and supply chain industry. All companies, including suppliers, original equipment producers, distributors, and service providers, have experienced some impact. The rapid transmission of the virus was not limited to China but extended to various regions across the globe, resulting in numerous supply chains being adversely impacted. In light of the pandemic-induced disruption to lean and supply chain management, companies have endeavored to comprehend the situation and explore potential solutions to mitigate the issue.
The Pandemic has presented significant challenges to the fundamental principles of lean and supply chain management. In recent years, there has been a significant improvement in mechanisms for achieving supply chain visibility. This development has proven advantageous for companies seeking to overcome the challenges associated with supply chain management. Despite the enormity of the issue, companies possess the capacity to scrutinize the hazards inherent in their supply chain and subsequently enhance their mitigation procedures. Hence, enterprises that acknowledge the idiosyncratic supply risks and proactively manage them can identify suitable remedies or, at the very least, mitigate their impact.
References
Adamek, D. (2022). Nike’s digital supply chain helps keep it running. [online] CFO Brew. Available at: https://www.cfobrew.com/stories/2022-07-26-nike-digital-supply-chain.
Agrawal, S., Jamwal, A. and Gupta, S. (2020). Effect of COVID-19 on the Indian Economy and Supply Chain. www.preprints.org. [online] doi:https://doi.org/10.20944/preprints202005.0148.v1.
Araz, O.M., Choi, T., Olson, D.L. and Salman, F.S. (2020). Data Analytics for Operational Risk Management. Decision Sciences, 51(6). doi:https://doi.org/10.1111/deci.12443.
Betti, F. and Ni, J. (2020). How China can rebuild global supply chain resilience after COVID-19. [online] World Economic Forum. Available at: https://www.weforum.org/agenda/2020/03/coronavirus-and-global-supply-chains/.
Hammad, H.M., Nauman, H.M.F., Abbas, F., Jawad, R., Farhad, W., Shahid, M., Bakhat, H.F., Farooque, A.A., Mubeen, M., Fahad, S. and Cerda, A. (2023). Impacts of COVID-19 Pandemic on environment, society, and food security. Environmental Science and Pollution Research. doi:https://doi.org/10.1007/s11356-023-25714-1.
Handfield, R., Sun, H. and Rothenberg, L. (2020). Assessing supply chain risk for apparel production in low cost countries using newsfeed analysis. Supply Chain Management: An International Journal, 25(6), pp.803–821. doi:https://doi.org/10.1108/scm-11-2019-0423.
Ivanov, D. (2020). Predicting the Impacts of Epidemic Outbreaks on Global Supply chains: a simulation-based Analysis on the Coronavirus Outbreak (COVID-19/SARS-CoV-2) Case. Transportation Research Part E: Logistics and Transportation Review, [online] 136(1), p.101922. doi:https://doi.org/10.1016/j.tre.2020.101922.
Kumar, D. (2020). COVID19 and Business: Challenges, Opportunities and Emerging Trends. [online] papers.ssrn.com. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3601517.
Nike (2021a). Nike at risk of supply chain issues due to Covid-19. [online] Just Style. Available at: https://www.just-style.com/news/nike-supply-chain-issues-covid/.
Nike (2021b). Nike at risk of supply chain issues due to Covid-19. [online] Just Style. Available at: https://www.just-style.com/news/nike-supply-chain-issues-covid/.
Pacheco, I. (2021). Nike’s Revenue Pinched by Supply-Chain Disruptions. Wall Street Journal. [online] September 23rd Available at: https://www.wsj.com/articles/nikes-revenue-pinched-by-supply-chain-disruptions-11632434721.
Paul, S.K. and Chowdhury, P. (2020). Strategies for Managing the Impacts of Disruptions During COVID-19: an Example of Toilet Paper. Global Journal of Flexible Systems Management, [online] 21(3), pp.283–293. doi:https://doi.org/10.1007/s40171-020-00248-4.
Riley, C. (2021). Nike is trying to outrun Supply Chain Problems. [online] The Atlanta Voice. Available at: https://theatlantavoice.com/nike-is-trying-to-outrun-supply-chain-problems/.
Shih, W.C. (2020). Global Supply Chains in a Post-Pandemic World. [online] Harvard Business Review. Available at: https://hbr.org/2020/09/global-supply-chains-in-a-post-pandemic-world.
Singh, S., Kumar, R., Panchal, R. and Tiwari, M.K. (2020). Impact of COVID-19 on logistics systems and disruptions in food supply chain. International Journal of Production Research, [online] 59(7), pp.1–16. doi:https://doi.org/10.1080/00207543.2020.1792000.
The Editors of Encyclopaedia Britannica (2019). Nike, Inc. | History & Facts. In: Encyclopædia Britannica. [online] Available at: https://www.britannica.com/topic/Nike-Inc.
WTO (2021). WTO and IMF heads call for lifting trade restrictions on medical supplies and food. [online] IMF. Available at: https://www.imf.org/en/News/Articles/2020/04/24/pr20187-wto-and-imf-joint-statement-on-trade-and-the-covid-19-response [Accessed May 19th 2020].
write