* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
It’s a moment of reckoning for supply chains that snake around the world. By going digital companies can manage the crisis and build resilience against future shocks
By Cyrus Hadavi, CEO and Chairman of Adexa. Previously he was Adjunct Professor of Operations Management at Columbia University
2020 is the year that, thanks to the challenges of pandemic panic buying and the complexities of the vaccine rollout, the world woke up to the importance of supply chains.
In 2021, I hope we can invest in policies that create resilient, agile and transparent supply chains that can have a particularly transformational effect in the global south. This is especially true in the face of climate change, environmental migration, and food insecurity - all of which will pose challenges for outdated supply chains.
Put simply, supply chains are the invisible blood vessels of the globe that allow goods to be transported. It is only when we experience a blood clot that we seek help. A good supply chain will be able to adapt to unforeseen changes using, for example, Artificial Intelligence - a bad one will be set in its ways.
Poor supply chains are a fatally limiting factor in development. Governments need to rethink how supply chains connect the world, and invest in the solutions that can decrease inequality and disruptions, and create opportunity and stability.
Supply chains should focus more on resilience and transparency (rather than just cost) in the face of global uncertainty. For example, in the pharmaceutical industry, there is currently no database - either centralized or distributed - which maps the critical components for drug manufacturing.
The pandemic is just the beginning of a phase in global development that will stress test our supply chains. In the coming decade, as we have seen in the recent past, we can expect mass migration, geopolitical tensions, increasing wealth inequality, food poverty and increased environmental disasters due to climate change - all of which will require resilient and adaptable supply chains.
For example, the United Nations has warned of ‘famines of biblical proportions in 2021’ and beyond, and the World Bank predicts 150 million additional people will be driven to extreme poverty this year.
Amongst those challenges, perhaps climate change is the most pressing. Currently, 20% of all global CO2 emissions come from the supply chains of multinational companies, whose supply chains are both vast, and often based on high emission forms of transport. The impact of these emissions is likely to be particularly felt in the global south.
Digitalizing a supply chain to increase its efficiency and reduce its carbon footprint is the key to making it sustainable. In a digitalized supply chain, tracing and identifying the worst carbon offenders along the supply chain becomes much easier, and we can adapt accordingly.
This digitalized and AI-enabled approach has another benefit for developing economies: It can prevent corruption, by ensuring that aid cannot be untraceably siphoned off, and that borders and customs agents operate transparently and efficiently.
A more resilient, AI-enabled supply chain can also help to provide food security. Complex supply chains provide 90% of urban consumers’ food in Africa and Asia. A disruption in raw produce or transport, triggered by natural disaster or climate change can severely disrupt food supply in these regions.
The digitalization of supply chains can also directly create economic opportunity and reduce poverty.
All these challenges - and opportunities - will increase exponentially in the world’s largest cities. Climate-based migration is creating an influx of migration from rural areas to urban centers (in the first half of 2020 alone, 9.8 million were displaced by disasters).
This will put huge strains on global infrastructures, supply chains included. Supply chains that are responsive to increased demand and develop in real-time (eg. at a time of increased migration immediately following a natural disaster) will be increasingly essential.
It has often been said that COVID is an opportunity to instigate a ‘great reset’. That reset should begin with policy-makers stress-testing their supply chains to identify weaknesses. Officials should be exposed to ‘simulation cockpit’ scenarios, where the impact of unforeseen events can be forecasted and prepared for.
Once policies have been developed, responsibility for swiftly reacting to a supply chain disruption should be shifted to AI-enabled machines, who are quicker, more objective and less corruptible.
The right supply chains can ensure that 2021 is less unpredictable than 2020, and can cushion the world’s most vulnerable economies and societies from harm.