Three Scenarios to Assist You in Global Supply Chain Recovery
Summary: Since 2019, the clothing industry has been facing varying disruptions. Some were technological, while others such as the pandemic forced brands to restrict or completely shut down operations. Predictive planning models can help your brand navigate out of these global supply chain disruptions in the future.
As a supply chain officer, you certainly want to ensure your brand is ready to face another wave of the pandemic, material shortage, or geopolitical development. Scenario planning with predictive outcomes can help leaders anticipate how disruptions unfold and identify risks and opportunities. So, let’s look at three disruptive scenarios and help guide global supply chain executives in critical decision-making.
1. Long-term Disruption Scenario
A long-term disruption is triggered when the situation takes longer to resolve. Supply chain disruptions can remain in place for months. Consumer confidence declines, leading to a drastic reduction in demand for specific products.
Take the coronavirus pandemic and the Ukraine war as examples. The pandemic took longer to contain, and the Russian invasion of Ukraine is an ongoing conflict. Besides the above two, even a minor shift in the geopolitical landscape can have long-term consequences for a global supply chain. The best examples are the Taliban takeover of Afghanistan or the 2021 Myanmar military junta coup.
What About the Impact?
As Gartner Supply Chain Practice senior director and analyst Sarah Watt points out, such scenarios affect customer spending habits. Therefore, during the recovery phase, brands must review their product portfolios and ensure they align with new spending patterns. The focus should be on products that bring revenue at resilient bottom lines.
Fashion brands should not spend resources on low-margin and low-volume products. Consumers reduced their spending on luxury goods during and after the pandemic. Instead, their focus remained on personal financial resilience and savings. Further, they also preferred e-stores rather than in-store experiences.
Long-term disruptions result in financial distress for suppliers, which might push them out of business. There is not enough capital to plow back into the production process. Therefore, brands must anticipate and profile suppliers before including them in their global supply chain.
2. Short-term Disruption Scenario
As the name suggests, the scenario involves internal and external factors that cause a short-term impact. Climatic conditions and weather patterns including earthquakes, tsunamis, floods, and hurricanes can result in short-term disruption. Some other disruptive scenarios involve terrorist activities and marine route congestion.
On the supply side, shortages of raw materials, labor disputes, and fuel supply have short-term consequences. The shortage of cotton supply from Brazil and Pakistan (due to the recent floods) resulted in price hikes and shortages for the clothing and apparel industry.
Brands can deal with short-term disruptions quickly if they have robust logistics backed by insightful and predictive supply chain analytics. The short-term disruption results in logistical issues during the recovery phase. More competition for ocean carriers, trucks, and planes increases costs. Plus, waiting times at the port increase significantly.
What’s the solution? Prioritizing shipments, product shelf life, and customer demand can help. Distributing suppliers and identifying alternative sources of supply is vital to managing short-term disruptions. Getting AI-powered data analytics becomes the backbone for predictive and prescriptive inventorying and shipping in such circumstances.
3. Secondary crisis scenario
These effects are a result of the first or the second scenarios. It is challenging to pinpoint and elaborate on what a secondary crisis looks like. But there are some excellent examples.
A disease outbreak, political change of guard, natural disasters, and government policy change can restrict the brand’s ability to transport raw materials or products. Government policy changes towards a specific product or export of raw materials such as the US taxation policy on the import of goods from China resulted in supply chain issues for a limited period. Likewise, garment factories in the EU had to halt production due to natural gas shortages.
Even the ‘bullwhip’ effect can be considered one of the consequences of long-term and short-term disruption scenarios. Brands see a considerable increase in product demand when retailers open up after facing disruptions. So, naturally, they scramble to keep up. However, it is best to analyze the retail demand and avoid over-ordering from firms deeper in the supply chain. Failing to do so may result in surplus manufacturing.
A Shift Toward Regional Supply Chains
Supply chain resilience backed by data analytics is the key to recovering from disruptions. Instead of global supply chains, companies in Europe and the United States are now looking at shorter supply chains than depending on Asia. Usually, manufacturers prefer sources closer to home when speed-to-market is the key priority. Prioritizing automated supply chain analytics for flexible logistics and careful selection of suppliers can help build resilient global supply chains.
Key Takeaways
Connect with Fashinza to create a supply chain that can face short-term and long-term disruptions as well as secondary crises.
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