Supply Chains Move from Just-in-Time to Just-in-Case

Context: New business trends are emerging as the global supply networks get reshaped to minimize disruption risks in the future, in light of the current pandemic.

Trends of an emerging shift in the Supply Chains: As many as 93% of the respondents said they plan to increase their supply-chain resilience in the coming months. – McKinsey Survey, May 2020.

• Diversification of supplier bases as a shield against geographical uncertainties.

• The companies are willing to add as a one-time “cost of resilience” to its total cost of ownership of the supply chain, while shifting from developed economies (EU) to developing ones (India).

• Reconfigurations of the warehouses to limit supply disruptions: 

• Splitting its existing warehouse between two cities will ensure uninterrupted supply even if few facilities end up in containment zones.
• Able to offer a single price all over India rather than variable regional pricing that characterizes the trade-in pre-COVID days.

• Increased automation in warehouses to build resilience: The labour crisis engendered by the pandemic has exposed these warehouses as weak links in the system. 

• More than 40% of the companies in the US are planning to invest in warehouse execution software, order-picking technology and robotics solutions. -2020 Honeywell Intelligrated Automation Investment Study.

• India will follow the US’s suit, in medium to long term, since the low labour costs tend to disincentivize technology adoption.

Conclusion: These trends indicate that global supply chains are being restructured in fundamental ways, which is likely to lead to the emergence of a crop of new global sourcing hubs.