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04.06.2020

Series: Global Impact of COVID-19: European Supply Chain

As the pandemic causes shutdowns around the world, it’s revealing vulnerabilities within the global supply chain — as well as new opportunities for growth and development.

In a few short months, COVID-19 has drastically altered daily life for millions, if not billions, of people around the world. As consumer priorities shift toward essential goods and stockpiling so as to limit their chance of exposure, supply chain management teams are learning to adapt quickly in order to provide access to the products they need.

Shutdowns in France, Germany, Italy, Spain, and other countries have brought European supply chains to a halt. Large industries like retail apparel [1] and automobiles [2] are in crisis. Others — such as consumer packaged goods — are faring better. [3] The internet is truly proving its value as a utility — many companies without an eCommerce presence are struggling now that the majority of brick-and-mortar stores are shuttered. The world is changing, and it’s hard to know what “normal” will look like after the pandemic has subsided. 

In the third and final part of this series, we examine how COVID-19 has impacted the global supply chains of multinational enterprises in continental Europe, as well as how Germany offers a potential model for weathering the storm.

A Lasting Impact on European Supply Chain Management

The pandemic is bringing about numerous changes to European supply chains, and presenting opportunities for industries to grow and evolve. 

One emerging trend for consumers is the potential to order products online and pick them up in-store. Omnichannel businesses already use this model, but it’s likely that many additional businesses will seek to expand in this direction. Real estate is limited in many parts of Europe, and in-store pick-up side-steps the need for massive inventory management solutions by enabling businesses to efficiently turn smaller spaces into shop fronts. The model is currently being rolled out for groceries and certain consumer goods, and will likely be extended to the majority of consumer products in some capacity in the future.

COVID-19 has also revealed some of the vulnerabilities that come with putting too many eggs in one proverbial basket. The global shortages of personal protective equipment [4] were especially dire considering that many of those products were produced in large manufacturing cities in China, like Wuhan, that had gone into shutdown as the outbreak began to spread more rapidly. This has highlighted the importance for countries around the world to be able to either produce essential goods themselves, or to have backup suppliers. Businesses in Germany have been especially quick to prioritize a two-supplier philosophy, which emphasizes partnering with suppliers in different regions of the world. This ensures that if one supplier becomes unavailable, essential goods can still be acquired from the other.

Different approaches to business structure have revealed additional vulnerabilities in supply chain management. Companies with decentralized structures were in a better position during the peak phase of the Covid-19 outbreak, as the decentralized structures allowed decisions to be made more quickly and effectively because they were more selective. . 

Other countries, such as France, take a more centralized approach to business — there are fewer companies, but they’re substantially bigger. However, as the shutdowns across Europe have demonstrated, if a large conglomerate in a centralized country is affected by the crisis, the impact is more widespread. The German model means that multiple companies could go into crisis mode without completely destabilizing an entire industry during a crisis. Going forward, many businesses may need to consider incorporating some of Germany’s decentralized practices in order to provide resilience in unprecedented situations. 

The Silver Lining to the Pandemic 

While it’s still too early to determine the long-term effects that the pandemic will have on the European economy and supply chain, one positive thing that’s emerged is an increase in the value of human-to-human connection. By that we don’t mean physical contact — rather, building trust and supportive relationships between companies and their supply chain partners is  proving to be more important than ever. Not only that, but maintaining good relationships with consumers and partners alike is key to creating a business that’s able to weather crisis situations. When the COVID-19 pandemic comes to an end, clients will remember who helped them and who was there to support them in times of need. And for customers, it’s no longer just a question of what they’re purchasing — it’s also whom they’re purchasing from.

COVID-19 has made it clear that employers can’t control a crisis with a centralized methodology. While having the trust of clients and consumers is crucial, they need to trust their managers and employees, too — they’re the ones who ultimately drive business forward. 

Körber offers a broad range of supply chain services to help businesses weather the challenges of the pandemic and crisis situations. Our decentralized structure allows us to meet the specific needs of individual clients, and enables us to remotely start up highly automated warehouses in as little as two weeks. We provide everything from warehouse automation and autonomous mobile robots to consulting services and transportation solutions — all of which are designed to help clients find the right supply chain solutions that work for their business.

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