Covid-19 Poorly Digitized Supply Chains Twice As Likely to Suffer From Disruptions

Companies with a low degree of supply chain digitization were twice as likely to suffer from product quality and supplier communication issues - according to Qima One, who conducted a survey drawing from the input of 700+ businesses around the world.

Among those with low supply chain digitization, 14% of respondents reported product quality issues having a “very serious impact” on their business in 2020, but for those with highly digitized supply chains, that number was cut down to just 7%.

Similarly, one-tenth of respondents reported difficulty communicating with suppliers as having a very serious impact on their operations, compared to about a fifth of respondents with “mostly manual” supply chains.

In addition, more than 40% of respondents reported that disruptions related to COVID-19 had a noticeable impact on their product quality. For nearly 60% of respondents, these disruptions also caused tangible issues in supplier communication, while 38% of respondents observed additional ethical issues in their supply chain as a result of the pandemic.

The adoption of the digital supply chain

A positive consequence of COVID-19 is that it doubled the pace of supply chain digitization in 2020: two-thirds of respondents reported that they have implemented new digital solutions to manage their sourcing.

Those who have done so during 2020 are even more likely to continue on the digitization and optimization trajectory, suggesting that businesses view supply chain digitization not as “one and done” measures, but as a long-term strategy.

Among the respondents who implemented new digital solutions, just over half reported doing so in response to the COVID-19 related disruptions, suggesting that the COVID-19 crisis was a major driving force in the continued digitization of supply chains. Respondents based in Asia were even more likely than the rest to implement digital solutions to manage their sourcing.

A digital supply chain is quickly becoming the norm, with 94% of businesses reporting at least some degree of digitization. It is viewed as an important tool to enable sourcing diversification: among respondents with plans to source new suppliers in 2021, almost 70% had implemented new digital tools to manage sourcing during 2020.

It seems, however, that some businesses are still lagging. Respondents were asked to assess the current rate of digitization in their supply chain, from “mostly manual” to “highly digitized”. Over half of the surveyed businesses have poorly digitized supply chains, with more than 6% still operating mostly on pen and paper.

Company size affected these results, with SMEs being twice more likely to rely on manual tools than large companies. In terms of specific industries, businesses in the Homewares sector and Electrical & Electronics brands were the most likely to have high and very highly digitized supply chains.

Supply chain visibility as a challenge

Visibility remains a challenge across the board: up to 77% of businesses have blind spots in their supply chains. Less than a quarter of all respondents said they have clearly identified contacts and direct communication with suppliers that make their products.

While this is an improvement compared to the results of QIMA’s 2018 survey (where only 11% of respondents reported that they know all of their suppliers), the percentage of businesses with blind spots in their supply chains remains alarmingly high.

Over a quarter of respondents named supply chain visibility among their top sourcing challenges of this year, ranking it even more important than ensuring consistent product quality. More than a tenth of respondents also expect ethical issues to be among their biggest challenges in the coming year.

Two-thirds of businesses would like more visibility into their supply chain processes and schedules. Respondents working in Textile, Apparel and Footwear felt the most confident about having visibility into their production processes and schedules, while Toy, Homeware and Promotional Products businesses were on the opposite end of the scale.