European supply chain heavily disrupted but continuing to add orders and prepares for demand to return
78% of European supply chain execs are experiencing a negative short-term impact but a majority are placing additional orders and conducting more detailed planning
European manufacturers, wholesalers and retailers are experiencing significant disruption as a result of COVID-19, with 78% seeing a negative effect from the pandemic and the governmental response. However, 17% are noticing positive effects, 5% say they are not affected in any way and 63% are placing additional orders with suppliers according to a survey by Supply Chain Media among 143 supply chain decision-makers in Europe.
Supply chain responses
The survey asked the respondents what action they have taken in response to the coronavirus crisis. Three quarters of the European companies have implemented health measures in warehouses to prevent the internal spread of the COVID-19 virus. The next most common action has been to place additional orders with suppliers (63% of the companies), which suggests many are looking to meet current demands but also plan ahead for the lifting lockdowns. Germany and Italy have now begun to slowly open up more of their economies to consumers, pointing to slightly better conditions potentially lying ahead.
Further positive news can be seen in European companies’ accelerated their strategic planning cycle (Sales & Operations Planning), with nearly 60% saying they have stepped this up from monthly to weekly or even daily.
37% have temporarily shut down their factories to ensure that employees can work more safely.
Shortening or extending the payment terms scored low (just 10% and 17% respectively).
Assessing risks
European supply chain professionals are currently focused on risk analysis of their own operations (production, warehouse and transport) according to the survey, with 94% reporting doing so. Alongside this, 85% of all respondents examined the operational risk of the incoming flow of raw materials and parts, and 76% of the outgoing flow of products (deliveries).
On a tactical level, 81% of companies looked at how much capacity their strategic suppliers had available and 77% explored different scenarios to keep supply and demand aligned.
Executives with global supply chain responsibility are paying more attention to the financial health of strategic suppliers than their peers with European responsibility only.
Supply chain bottlenecks
According to the respondents, the most important supply chain bottlenecks during the coronavirus crisis are inbound flows of goods from suppliers (62%), lack of insight into customer demand (60%) and outbound shipments to customers (50%). Lack of demand visibility scored the highest among manufacturers of consumer goods, with 70%. In business-to-business, three quarters of companies regard the supply of raw materials and parts as the biggest bottleneck. “
58% of respondents have seen some degree of decreased demand, while 30% have experienced an increase. Extreme decreases and increases in demand have mainly been experienced in consumer goods.
Most companies are seeing a clear decline on the supply side in terms of numbers and volume, especially in the supply of raw materials and components (59% of respondents). The supply side remains stable for just over a quarter of respondents.