COVID-19 CALLS FOR MORE RESILIENT SUPPLY CHAINS

The outbreak of COVID-19 pandemic has greatly affected the global industrial supply chains in ways that are difficult to model and determine. The pandemic with multiple national lockdowns has caused significant challenges for example by temporarily emptying stocks and stopping the flow of raw materials. How can companies improve their supply chain resilience to avoid disruptions in a post-pandemic world?

The COVID-19 has affected all industries around the world and the pulp and paper industry is no exception. Alike others it has been coping with supply chain disruptions affecting the production and exports of manufactured goods. On the other hand, consumer lifestyle has partly changed due to pandemic and lockdowns. While demand for many products declined, e-commerce sales rise and fewer people were shopping in stores and eating out, the demand for personal hygiene products (including masks), food packaging products, corrugated packaging, and other paper-based materials increased rapidly. After the beginning of the pandemic, the demand has balanced.

Throughout the pandemic, the pulp and paper industry has been balancing between fluctuating demand and structural change. Even though the pandemic has been challenging also for pulp and paper industry for example due to staff shortages, it has not clearly generated new difficulties in supply chains. In many cases it has highlighted previously unseen weaknesses in supply chains and has accelerated problems that already existed, like complexity and lack of transparency.

Global industries face common issues

As pulp and paper is a global industry, detected issues like supply shortages, rising shipping costs and travel bans have affected logistics activities through the supply chain. Disruptions have created bottlenecks throughout the supply chain, caused unbalance and limited the availability of containers for ocean freight increasing shipping costs. As these problems cannot be solved over night as they occur, alternative solutions need to be developed to improve supply chain resilience. To adapt to the fluctuating demand and continued supply chain disruptions, alternative supply lines are needed and an improved capability to react quickly in a changing environment.

Besides efficiency, the long-term focus should also be considered in supply chain security.

Key to recovery – Improving supply chain resilience

The pandemic revealed how damaging it can be if global supply chains focus solely on efficiency. Changing an existing supply chain is not simple, as it has to be sustainable and secure, and it still needs to balance the demands for cost efficiency.

5 key points for improving supply chain resilience:

1. Enhance transparency
• Transparency can be improved by creating a list of critical components, recognizing alternative sources, and defining the origin of supply.
• Transparent supply chain helps to drive improvements and react faster and more effectively when problems occur.

2. Increase flexibility
• Flexibility requires for example diversified supplier base, planning of alternative routes, end-to-end supply chain communication and adaptable cost structure.
• Flexible supply chain helps to manage costs and resources, and to minimize the risk of disruption in uncertain times.

3. Invest in security
• Security can be improved by knowing your suppliers, conducting a risk assessment, and defining the threats and implementing key performance indicators (KPIs).
• Secured supply chain improves for example product safety and handling, inventory management, supply chain visibility and possible customs clearance process.

4. Improve sustainability
• Sustainability can be added for example by reducing waste with simplified supply chain processes and minimizing overproduction by supply and demand planning.
• Sustainable supply chain means reduced environmental impact, increased profitability, continuous improvement, and enhanced reputation.

5. Adopt digital innovations
• Digitalization starts with identifying the challenges in operations and defining what is the approach in digital transformation.
• Digitalization improves efficiency, allows better tracking and traceability, and enables the use of big data and analytics which can predict supply and demand.

A competitive and secured supply chain with a capability to respond disruptions and contribute the sustainability is critical to ensure a long-term business success. By implementing effective supply chain practices, utilizing digital innovations, and implementing key performance indicators (KPI) to measure success, supply chain resilience can be significantly improved.

On the author: Tiina Sorvari has a Bachelors Degree in Industrial management and Business and has been a part of the Vision Hunters´ team since 2020.

Vision Hunters provides strategic advisory services for the forest and bio-based industries, and energy sectors. We assist leadership teams in making the smartest strategic choices to improve the outcome of their company in the future. We are highly experienced and result-oriented and have advised many of the leading companies in our industry.