The COVID-19 pandemic has caused disruptions in the global supply chains of industries.

Nonetheless, it can be an opportunity to learn to deal with the unpredictable. After the pandemic ends, companies could improve their supply chains by prioritizing resilience over efficiency, create backup plans from their main supply chains, more improvements to connect more alternative suppliers in global supply chains and always innovate in technology and strategy.

 

The pandemic has shown that many businesses are not completely conscious of the vulnerability of their supply chain network to global shocks. When countries play a dominant role as the “world’s factories”, any major disruption or force majeure will put global supply chains at risk.

One example here is the semiconductor shortage in Indonesia that has weakened productivity in related industries. In addition, lockdowns or social mobility restrictions have caused massive disruptions within the global supply chains of manufacturing companies that depend on basic or intermediate materials or components from suppliers in different countries.

Semiconductor chips are ubiquitous; without this chip, a lot of products will not work. This is already being felt by the auto and electronics industries, where manufacturers have been forced to stall production as a result of the global chip shortage.

In fact, the production of semiconductors can take up to six months, so when automakers cancel their orders, consumer tech companies will swoop in and buy those chips. When car demand returns and automakers need semiconductors again, there would not be enough to go around.

Many original tier 1 equipment manufacturers (OEM) and tier 2 distributors of OEM have lacked backup plans for overcoming a shortage of semiconductors. The impact was quite massive, where even tier 2 suppliers experienced shortages due to the halt of supplies from tier 1 companies. The shortage also affected the delivery lead times and revenues. This issue with semiconductors is also relatable and can be seen in other supply chain shortage cases that involve offshore suppliers.

Manufacturing and production systems must adapt to new challenges. The conventional linear supply chain process should shift to digital supply networks (DSN). This updated supply chain technology is improving the end-to-end supply chain process and supports the ability of businesses to avoid shocks. A DNS removes functional silos to enable end-to-end process, integration and agility.

President Joko “Jokowi” Widodo said at the opening of the 2020 National Coordination Meeting for the Procurement of Government Goods/Services in November 2020 that in a pandemic situation like today, it was very important to accelerate procurement. Warning alarms need to be given because many ministries, agencies and local governments still work using the old ways.

Solving the agility of supply fulfilment in a timely manner, even in force majeure conditions, should also be in accordance with leveraging advanced supply technologies that involve the internet of things, artificial intelligence, robotics, 5G (for the countries that have been going toward this) and DSNs.

A DSN is designed to anticipate and meet future challenges, including in the supply chain realm, to mitigate shocks during the pandemic. This solution assumes that manufacturing inventory management during force majeure includes a mature IT infrastructure that will alert and record shortages, stock allocations, delivery and logistics routes and backup plans, as well as an analysis of stock management in the warehouse or manufacturing process.

Such a process can be linked to global supply sources to get connected with the supply stock in myriad regions, and it can widen our sourcing expertise in an efficient way.

The Government Goods/Services Procurement Policy Agency (LKPP) must dare to make breakthroughs, especially by utilizing super modern technology for procurement. It needs to build a real-time procurement system, shift to 100 percent e-procurement and take advantage of technology to improve the procurement data processing capacity.

With this breakthrough and application of technology, related parties can directly monitor the process and the realization value of the government's procurement of goods and services directly. it can serve as an early warning system for the central and regional governments to take accelerated steps to expand our manufacturing with global supply chains.  

It will impact the transparent and accountable procurement process and avoid potential conflicts of interest and collusion that can occur under a direct appointment mechanism. And in terms of shocks like the pandemic, it manages logistics arrangements during shortages and widens the possibility of looking for supply domains and other connections both onshore and offshore.

This will also help ensure supply can be fulfilled in a timely manner to meet the delivery lead times and total quantity of orders.

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The writer is a strategic procurement professional at IBM Indonesia. These views are personal.