Diversified bases, local inventories, e-commerce & low-cost tech key for robust supply chain: CBRE

May 29, 2020: In a report titled ‘Refocusing Supply Chains in the COVID-19 Era’, CBRE noted that expanding network of bases, keeping inventories close to consumption points, shifting to e-commerce and adopting low-cost technology as the key to building a resilient supply chain.

Expanded bases
The severe disruption caused by COVID-19 has exposed the danger of over-reliance on a single base of production. At the same time, “re-shoring” is already a key topic in boardrooms and governments with manufacturing and sourcing links to Asia.

“Across key industries such as automotive, electronics, technology and consumer goods, nearly all supply chains can be traced to China, still the world’s dominant global manufacturer. While leading manufacturers and retailers with global visibility systems were made aware of initial Chinese supplier disruptions in the final months of 2019 - enabling them to trigger the ramp-up of secondary supplier sources and mitigate some of the impacts - smaller firms with more regional and local suppliers and lacking the resources to invest in supplier visibility and resiliency were unable to do so,” says the report.

Local inventories
One of the most instantaneous and visible impacts of the spread of COVID-19 has been the rapid depletion of inventory – a trend that has seen supermarket shelves left empty as consumers panic-buy large quantities of daily necessities in anticipation of potential quarantine measures, and automotive manufacturing plants forced to halt production due to a lack of intermediate parts and materials.

“In order to maintain sales as supply chains are reset, CBRE believes brands and manufacturers, especially those engaged in the production of necessities, may tend to store more stock and keep inventory closer to consumption points and service locations. Maintaining higher stock levels in-country is set to generate more warehousing demand and will transform how companies store goods, plan infrastructure and serve their local customers,” says the report.  

E-commerce
Although e-commerce was already seeing widespread use by regional consumers, the COVID-19 pandemic has accelerated adoption as social distancing and stay-at-home orders force people to go online to purchase daily necessities. More demographic groups that had not purchased products online before are now doing so regularly and have come to realise that e-commerce ordering and delivery is both convenient and safe.

“CBRE believes that even after the pandemic has been contained, a large volume of purchases will continue to be fulfilled by e-commerce, particularly in countries where there is limited retail infrastructure. In some particularly underdeveloped markets, e-commerce may even overtake less efficient multi-tier distribution and brick-and-mortar retail networks. This may create delivery challenges and - in some situations - create demand for centralised pickup and delivery centres, of which some may be 24/7 and automated,” reads the report.

Technology
While manpower was already a challenge when economies were booming, COVID-19 has heightened manufacturers’ and logistics providers’ concerns around labour supply. Health concerns have exposed labour as a risk in the warehouse – whether people fall ill or call in sick for fear of potential disease transmission in the workplace.

“Automation is being viewed as a solution to these new labour risks, with flexible automation and robotics solutions capable of yielding significant benefits. For example, not only can companies keep operating even during severe labour shortages, they can also more closely and efficiently adhere to hygiene protocols when products are only handled by robots” says the report.