Disruptions caused by Covid-19 have shown that the “old” way of managing supply chain risks by ensuring there is excess capacity and stock in the system no longer works, according to Chris Savage of Zorro Logistics.
Speaking at the 13th Annual Logistics and Transport Workshop hosted by the Namibian-German Centre for Logistics, Savage said that a “new mindset” was required for logistics management.
“Logistics chains must be flexible. Managers have to accept new lead times, adapt to new freight rates, collaborate and digitise to ensure visibility.
“Companies have started shorting supply chains and reversing globalisation – which offers opportunity for developing countries,” he said.
What is needed in these disruptive times is sustainable and resilient supply chains.
Logistics managers also have to focus on identifying and detecting risks as quickly as possible in order to react appropriately.
Speaking in the same presentation, Richard Gibson of Idris Logistics said it was time to challenge the historical approach to risk management.
Most consultancies and academic literature focus on spare capacity and spare stocks, but for many businesses that approach is simply not economically viable.
What Covid-19 has shown is that supply chains fail in the face of disruption – even if there is some redundancy built in.
A much better approach is having partnerships, to collaborate, have modern information technology systems, and to work on an asset-light approach.
Logistics managers have to live with a “new normal”, which includes high sea freight rates, and unreliable and expensive airfreight.
This is expected to continue for some time to come.
Research shows that many companies are adapting successfully. “Freight has adopted new models to find its way through to customers.”
The bottom line, according to Savage, is to ensure that the company continues generating cash through sales.
Profitability comes after survival.