COVID-19’s Impact on the Supply Chain

2020 was a year of uncertainty and unprecedented change. The COVID-19 pandemic will be a core memory for everyone. It changed the way we all live in some form or another. COVID-19’s impact on the supply chain is no exception. 

Most of us were unaware of the supply chain’s importance until it was disrupted by the pandemic. Key medical supplies and relief efforts were delayed or halted. International exports became increasingly expensive. Retail prices for everyday items skyrocketed. Logistics companies struggled to communicate effectively after a sudden move to remote working. 

The transportation industry was faced with a unique challenge that required innovative solutions. Many of those solutions have been permanently implemented by the transportation industry, including improved technology, strategic planning, and data sharing. Logistics companies are continuing to invest in automation and domestic material sourcing to keep our nation’s supply chains resilient. The U.S. government passed multiple supply chain laws and grants in the two-and-a-half years since the worldwide shutdown. 

The transportation industry entered 2020 more vulnerable than any of us imagined, but it has since emerged stronger and better prepared for anything the world throws at it.

Better Technology

Before the pandemic, many logistics companies operated independently with little to no data-sharing capabilities. This worked fine when the supply chain was healthy and efficient, but a lack of collaborative technology made problem-solving a major issue. The pandemic fast-tracked the adoption of improved technology across the supply chain. 

Supply Chain Management Software

One of the most common technological innovations in the supply chain industry is the widespread adoption of supply chain management software (SCM). The pandemic demonstrated that the transportation industry needed to address their supply chain visibility. SCM software allows for data-sharing between shippers, receivers, and brokers. It provides a central view of things like materials required for manufacturing, contacts associated with the order, transport data, and much more. 

SCM software allows for cross-platform communication thanks to cloud computing. Cloud-based programs became essential after the pandemic because they allow the user to access data at any time and any place. Working from home is now the new normal for many businesses across the country. The cloud makes collaborative work possible from anywhere in the world. Flexibility and visibility are essential for keeping supply chains healthy, and SCM software provides both. 

Check out our supply chain technology blog for a list of the top-rated SCM programs.

Automation

The pandemic demonstrated that although nothing can ever truly replace the human workforce, people are still vulnerable to diseases and are limited in the hours they can work. Transportation companies combatted this by investing in robotics and automated warehouses. Supply chain robotics experts estimate that at least 75% of large businesses will adopt robotic technology by 2026. Robots are unlikely to completely replace the human workforce, but rather work alongside humans to aid with overall efficiency. Automation will continue to increase as labor becomes increasingly difficult to recruit.

Strategic Planning

Supply chain workarounds are now standard practices thanks to the pandemic and the resulting transportation disruptions. Businesses are no longer waiting for a major problem to occur before taking action. Instead, they are investing in sustainable and flexible assets that allow them the freedom to operate in any situation. 

Warehousing

Forward-thinking retailers with large inventories are investing in warehouse space. Before 2020, more than 40% of retail companies stated that they could not provide an accurate count of their inventory. This was in large part due to a lack of communication between the retailer and the third-party warehouse. This problem got worse as COVID-19’s impacts on the supply chain worsened.

To combat this, large enterprises are buying their own warehouses to better control their inventory. This gives them full control of their products at all times. They also provide a staging ground for last-mile delivery planning. Businesses that invest in warehouse space can expect to see more efficiency, better customer satisfaction, and improved supply chain visibility. 

Material Sourcing

The price of international imports skyrocketed as a result of the pandemic and its economic impacts. This prompted U.S. industries to halt their reliance on foreign suppliers and focus instead on domestically sourced materials. Domestic sourcing has historically been more expensive than overseas, but the advantages in quality and flexibility far outweigh the costs.

Domestic sourcing allows businesses to avoid tariffs, trade restrictions, and other geopolitical events that can wreck the global supply chain. Industries have realized in the wake of the pandemic that they had far less control of their own product than they originally assumed. Cutting ties with international shippers and opting instead to use domestic sources benefits local economies, ensures quality, and gives businesses more control.

Utilizing 3PLs

Overseeing a complex transportation system on your own is stressful enough. Once you add a global pandemic and unprecedented supply chain disruptions to the mix, it can be devastating for companies to manage on their own. Many have turned to third-party logistics (3PL) companies, like KCH, to help them navigate a volatile market. 3PLs assist shippers by finding trucks to move their loads, communicating between parties, and ensuring a safe and prompt delivery. 3PLs accomplish this by utilizing a tech-driven approach focused on efficiency that saves shippers money in the long run.

Government Involvement

The economy relies on a healthy supply chain. When that delicate system is disrupted or halted completely, national governments need to step in with legislation aimed at getting things back on track. After COVID-19’s impacts on the supply chain, the U.S. government realized that preemptive action was the only way to ensure that the transportation industry is strong enough to handle more disruptions.

Inflation Reduction Act

In August 2022, the Biden-Haris administration signed the Inflation Reduction Act of 2022 (IRA) into U.S. law. As the name suggests, its main objective is to protect against rising inflation caused by pandemic-related economic struggles. It also includes billions in federal funding for renewable energy research and application. This will help the U.S. reduce reliance on foreign oil and energy exporters in an effort to become more self-sufficient.

 Supply Chains Disruptions Task Force

In the summer of 2021, President Joe Biden announced the formation of a task force dedicated to identifying and resolving supply chain disruptions. This administration has made great leaps towards improving the resiliency of America’s supply chains by investing in domestic sourcing of raw materials and medical supplies, grants for infrastructure improvements, and research and development of electric vehicles. 

The pandemic forced the transportation industry to rethink its entire structure. Although these changes were tough to adopt and overcome, it is clear that supply chains are now more resilient than ever before. Domestic economies and manufacturers are thriving since the industry began looking locally for their resources. New technology was birthed that will continue to help the transportation industry in the future. Governments are now more focused than ever on maintaining fragile supply chains. The industry had a wake up call in 2020, but necessity gave way to innovation.  

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