By: Megan Benger, Supply Chain Director at TMX
COVID-19 has uncovered many things that could go wrong with the global supply chain over the past two years. With nationwide lockdowns and factory closures in major supplier locations, such as the ongoing shutdowns in China, companies have had to think on their feet, and find last minute solutions to keep their businesses afloat.
While we are well on the road to recovery, we need to anticipate the next major challenge. From geopolitical events to natural disasters, there are countless scenarios that continue to threaten the global supply chain – some we can prepare for and others that are harder to anticipate.
It is crucial that businesses and governments collaborate and plan out strategies that build supply chain resilience and can adapt to any situation.
What we have seen in trade between Vietnam and Australia illustrates how major sectors of the economy were affected by the pandemic, and how we are working to build resilience into this important trade route.
Vietnam is one of Australia’s biggest trade markets, growing at over 12 per cent annually. Trade remained healthy despite the pandemic and according to the Vietnam Trade Office in Australia, exports from Vietnam to Australia reached USD 4.45 billion for the first half of 2021, while imports from Australia to Vietnam stood around USD 7.95 billion. That said, there are still major sectors of trade where supply chain bottlenecks have occurred as a result of the pandemic.
Finding opportunities in a crisis
A diverse range of sectors are engaged in trading between Australia and Vietnam. Whether it is Vietnam’s electronics, agricultural products and seafood, or Australia’s fuels and minerals, both countries have very different supply chains catering to different product offerings.
Although Vietnam was able to keep its factory operations active and open at the onset of the pandemic, global lockdowns caused freight backlogs and shipping congestion, which had a ripple-on effect reaching Vietnam. This had a huge impact on Australian companies trying to move freight out of Vietnam as shipping rates and lead times increased exponentially.
Now that we are well into 2022, these disruptions have lessened considerably, but they have not gone away completely, which still creates challenges around moving product and maintaining production.
It is therefore important to keep in mind that once a crisis is in motion, turning it into an opportunity requires new ways of seeing, thinking, and responding. Vietnam did just that, by leveraging its strategic location to bypass shipping bottlenecks, bringing goods from China into Vietnam by land.
To bolster this, the government in Vietnam has been investing heavily in strengthening its supply chain infrastructure, improving its road, port, airport, and rail connectivity. As this takes place over the next 10 to15 years, Vietnam is projected to not only become a connectivity hub between China and the rest of Asia, but also a gateway to the rest of the world as well thanks to with its port infrastructure.
While global supply chain bottlenecks have significantly eased in the past year, we cannot neglect the importance of supply chain resilience as the global shipping landscape continues to feel the effects of supply chain disruptions over the next few months.
Unlocking resilience with diversification, collaboration, and information
A resilient supply chain is defined by its capacity for resistance and recovery. This refers to the ability to resist and even circumvent the impacts of any disruption, or at least be able to quickly recover from it. As well as natural disasters, human-made disasters and health crises, disruptions could also come in the form of unexpected competition, sudden market trends, or even rapid changes in consumer shopping behaviours – as we’ve seen in ecommerce.
The most resilient and robust supply chains are designed to do more than resist and recover. They forecast, anticipate, and respond quickly to whatever unexpected risks or opportunities the future might hold.
So how do we achieve that? Three key steps that have worked well are: diversifying your supply chain, taking a more collaboration approach, and leveraging your supply chain’s flow of information.
Firstly, diversification means having multiple sources of supply readily available to move products through supply chains. Supply chain diversification enables flexibility, which allows you to respond to changing market trends and customer demands.
Businesses can achieve this is by exploring alternatives to the ports they are currently processing through and rerouting to avoid congestion. In the case of Vietnam, following the nationwide lockdown, many companies had to consider moving their product out from different parts of Vietnam.
Secondly, supply chain collaboration allows businesses and their external partners to sustain an optimized flow through the supply chain, helping them to efficiently meet demand and ensure on-time, in-full delivery. We are increasingly seeing companies revisit their arrangements with freight suppliers and trying to lock in capacity to prevent against future bottlenecks. Those that were able to act quickly saw considerable success, as they were able to develop strong relationships with suppliers.
Lastly, leveraging your supply chain’s flow of information is important. Informed, proactive decisions are always better than knee jerk reactions. Technology is huge when it comes to pre-empting challenges before they hit. There is currently a large focus on technology as a means of providing holistic visibility over the entire supply chain, especially for third-party logistics (3PL) and shipping companies. Predictive data can quickly anticipate and warn us of impending issues and has given many companies the opportunity to quickly plan around an event to mitigate and offset some of that risk.
With many more integrated platform-based technology coming into play, the solutions that are now emerging are a good indication of the real end-to-end mindset that companies need to possess to plan and build resilience in their supply chains.
Lessons learnt: Preparation above all else
Diversification, collaboration, and information – there are many available opportunities to tap into, but the key takeaway is that now is the time to prepare for the next disruption. It is imperative to start due diligence and planning early to ensure that a strong and adaptive strategy is in place.
Business transformation consultancies like TMX not only can help businesses play defense, but also offence, in finding its competitive advantage by building a supply chain resilience strategy centered around disruption avoidance.