COVID-19 has shined a light on just how inflexible supply chains are in the event of global crises. Many manufacturing and distribution businesses in Australia, and around the world, were forced to adapt during the height of the pandemic and struggled to keep up with the growing needs of consumers.
With awareness brought to the current conditions of supply chains, the focus shifted and magnified the problem with Australia’s reliance on traditional supply chains. It also shed light on how this reliance makes us susceptible to more risk in times of crisis.
For more than a generation, Australia has relied on the improved price points and margins that come with a global supply chain of interconnectedness; and, we’re not alone. Most countries in the developed world have benefitted from the global supply chain with improved efficiencies to inventory levels and on-time deliveries, with only a small margin of supply chain disruption.
However, COVID-19 changed the game; causing a massive supply chain issue across the globe, thanks to shipping delays, biohazards, and more. Many businesses found vulnerabilities in their supply chain they didn’t know they had, and a global shortage of essential medical supplies, most notably ventilators, has caused Australia to rethink current supply chain conditions and focus on the importance of supply chain resilience.
$107.2 Million Supply Chain Resilience Initiative
In 2020, Australia’s federal government announced they would be injecting $107.2 million into the Supply Chain Resilience Initiative (SCRI) as part of their Modern Manufacturing Strategy (MMS).
The SCRI is set to focus on evaluating supply chain resilience under normal circumstances and during crises—such as the COVID-19 pandemic. The initiative will also highlight the vulnerabilities within our current supply chain system and determine the critical gaps that need to be addressed.
As a result, the SCRI will give businesses support to establish or scale capabilities which will address supply chain vulnerability. Whether that be by bringing more manufacturing to Australia, holding more supply, creating systems for alternative delivery and shipping, improving information sharing between industry and governments, or the adoption of new technology.
The importance of local manufacturing
It’s no surprise that local manufacturing and the return to “Made in Australia” are major forces driving Australia’s supply chain resilience plan.
With such disruption to the industry during 2020, it’s clear that there are critical gaps within the Australian supply chain; and, the need for a more balanced use of global and local supply chains are required.
To achieve this, Australian manufacturing businesses will need to tighten supply chain vulnerabilities and consider the introduction of more local manufacturing. In the current economic climate and with trade tensions between Australia and China continuing, Australia’s local industries will need to look at regional supply chain options.
Due to these trade tensions and other vulnerabilities in the current supply chain, many industry bodies are calling for the return of “Made in Australia” to help ease the reliance on global supply. And, founder of machinery marketplace Machines4U, Steve Krebs, agrees.
“Now, more than ever, we can clearly see how important it is to have local manufacturing in this country [Australia].
“COVID-19 was a magnifier for a lot of businesses, especially those in manufacturing and distribution. These businesses were essential to Australia’s economic recovery during the pandemic, and while it has been difficult for them to adjust, they now have the opportunity to rethink their operations and put more energy into creating a resilient supply chain for Australia. And it seems, bringing this industry back to Australia instead of relying on so much global supply could be the key.”
The key to long-term resilience
While a key strategy for long-term resilience is yet to be determined, it’s likely to include more local manufacturing, adjusted localised inventory levels and the investment in new technology.
COVID-19 brought uncertainty and made us more aware of how unpredictable the world can be. So, having the technology to make changes and strategic decisions quickly using informed data is critical to the manufacturing industry’s supply chain success.
In order to create long-term resilience from this, manufacturing and distribution companies will need to look at their new normal, taking into account the issues faced during COVID-19, such as short supply and long waiting periods.
These businesses may consider looking to new technologies which can help increase efficiencies and improve operation. Emerging technology such as the cloud, automation, robotics, Artificial Intelligence (AI), and IoT are all investments which could be extremely beneficial to manufacturing and distribution businesses in the future.
Incorporating these types of technologies offers scalability and gives businesses the freedom to quickly adapt at a moment’s notice, which is paramount to success in crises.
Of course, supply chain resilience will look different from business to business, but overall the government’s SCRI will help propel Australia’s supply chain to a more localised industry by creating more domestic manufacturing.