Publish Date

Jan 19, 2021

Retooling the Supply Chain After a Global Channel Shift

Tax Insights

Companies and commentators have spent the last year expending much effort in order to understand which of COVID-19’s many upheavals will be temporary and which will endure for the long term. Supply chains have been at the heart of many of these changes. Companies have had to adjust at extraordinary speed as consumers suddenly moved, browsed and bought very differently.

There could be seismic consequences for supply chain economics. “We have seen a massive channel shift with years of digital growth happening in just a few months. If more direct relationships between consumers and brands lead to fewer bulk deliveries to retailers, the companies that have historically driven efficiencies by operating with full trucks or containers may struggle,” says A&M Managing Director Sean Laffere, a leader in A&M’s Supply Chain Services practice. “The companies that are stuck with larger fixed costs – whether it is warehouses or substantial fleets – may find it more difficult to adjust in the short and medium term.”

In the United States, lockdowns effectively doubled e-commerce’s market share in a matter of weeks, reaching around 20 percent of all purchasing. “Although indications tell us that the level seen at the height of the first wave may be a peak rather than a new baseline, there is no question that companies need to adapt to a future that is more digital,” says Richard Dryden, Managing Director at Alvarez & Marsal (A&M).

That being said, non-digital retail still represents a comfortable majority of all commercial activity. “The most adaptable organizations are focused on creating a multispeed supply chain that accommodates a growing reliance on e-commerce, but which also maintains a focus on traditional sales channels and consumer behaviors. Multispeed or omnichannel supply chains can handle business as usual in both traditional and digital environments, while being flexible enough to respond to future force majeure events, such as natural disasters or another pandemic,” says Mr. Dryden.

While supply chains have responded to an e-commerce boom, more automation has consequences at every stage of the supply chain. A&M Managing Director Steve Barron says, “Bringing technology into the supply chain can deliver greater agility and a more granular understanding of real-time demand, with beneficial effects on risk and capex.” The advantages of digitized supply chains are clear, but to A&M Managing Director Paul Law, COVID-19 has shown that there are risks in driving for near-total automation. A labelling specialist with advanced manufacturing capabilities was battling increasing levels of non-stock and overstock caused by automated supply chain and production processes that were operating as normal despite the dramatic demand shifts caused by the pandemic. “The company’s solution was actually to put more human touchpoints in the manufacturing loop, ensuring that the supply chain could deal with unprecedented circumstances in a nuanced way rather than being over-reliant on technology,” says Mr. Law…