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Stamford, Conn., May 14, 2020

Gartner Describes Three Prevaccine Scenarios for Supply Chain Leaders

Survey Shows That 84% of Organizations Face Disruption Due to COVID-19

As the coronavirus continues to disrupt global supply chains, Gartner, Inc. has developed three scenarios to help chief supply chain officers (CSCOs) anticipate how the future may unfold. 

On March 16-18, Gartner conducted a poll of 833 members from the Gartner Research Circle Members (a Gartner-managed panel composed of IT and IT/business professionals) and found that 84% of organizations are facing varying forms of disruption – from slight disruptions to operations being reduced, restricted or closed.

“As inventory buffers start to deplete and demands shift, there is even more disruption coming our way,” said Sarah Watt, senior director analyst with the Gartner Supply Chain Practice. “While this crisis requires a fair amount of crucial day-to-day decision-making, CSCOs must start planning for a recovery and make preemptive decisions to set their organization up for success.”

Scenario planning enables supply chain leaders to anticipate how the coronavirus disruption will unfold and identify both risk and opportunities. It provides CSCOs with the data to demand investments in supply chain resiliency and agility.

Gartner has identified three prevaccine scenarios (see Figure 1) that CSCOs can utilize in their decision-making process. The scenarios will vary based both on geography and product. 

Figure 1: Supply Chain Scenarios

Source: Gartner (May 2020)

Scenario 1: Short-Term Disruption

In this scenario, there is significant impact from COVID-19 in the short term, but the virus will be dealt with quickly. Eventually, restrictions are lifted, and customer confidence increases.

“This is a best-case scenario. However, supply chain leaders shouldn’t expect an imminent return to business as usual. Supply chain organizations will not be the same after COVID-19, they will enter a ‘new normal’,” Ms. Watt said. “During a quick recovery, understanding changes in demand, establishing supply and managing economic impacts will be crucial to the speed of recovery. Demand sensing is particularly important, as consumer sentiment is changing.”

A quick move into the recovery phase also creates short-term competition for logistics services. Space on planes, trucks and ocean carriers will be in high demand and result in increased costs. CSCOs must work with their logistics leaders to plan ahead and prioritize shipments based on customer demand, shelf life and anticipated competitor position.

Scenario 2: Long-Term Disruption

This scenario describes a world in which the virus takes longer to contain, and restrictions remain in place for many months. Customer confidence declines, with a recession following.

“This is the time to radically review product portfolios and evaluate if they match with the current customer spending habits,” Ms. Watt continued. “Stop low-volume and low-margin products and focus on what makes up the bulk of the organization’s revenue.”

In the long term, customer behavior and spending habits may change, as financial insecurity will increase emphasis on personal financial resilience – which may decrease spending on luxury goods. Consumers are likely to stick with e-commerce channels driven by concerns about physically shopping in store. “Financial insecurity is also something suppliers will face, and some might not survive the crisis. CSCOs must anticipate these situations, profiling where suppliers may be in financial distress and taking appropriate action,” Ms. Watt added.

Scenario 3: Secondary Crisis

After organizations experience either the first or second scenario, it’s also a possibility that a second disruption will follow – caused by COVID-19, natural disasters or other major incidents. Therefore, it is important that CSCOs learn from the current crisis and improve their supply chain’s resilience to all forms of disruption.

“While it’s difficult to predict what a secondary crisis will look like, there are certain learnings from the current disruption that will prove helpful. For example, supply chain organizations must consider the impact of the changing political landscape on their ability to move products between countries, as some are restricting the export of critical products. Medium-term forms of protectionism may mean that supply chains need to reconsider their network design and pivot toward more regionalized production,” Ms. Watt concluded. 

Gartner clients can learn more in the report “Get Ahead of COVID-19: Apply 3 Supply Chain Scenarios for Proactive Decision Making.”

Learn more about how to lead organizations through the disruption of coronavirus in the Gartner coronavirus resource center, a collection of complimentary Gartner research and webinars to help organizations respond, manage and prepare for the rapid spread and global impact of COVID-19.

 

About the Gartner Supply Chain Practice

The Gartner Supply Chain Practice brings together the most relevant analysis, peer-based best practices, metrics and data across Gartner and offers supply chain leaders a platform to make the choices that will drive their business forward. Additional information is available at https://www.gartner.com/en/supply-chain. Follow news and update from the Gartner Supply Chain Practice on Twitter and LinkedIn using #GartnerSC.

About Gartner

Gartner, Inc. (NYSE: IT) is the world’s leading research and advisory company and a member of the S&P 500. We equip business leaders with indispensable insights, advice and tools to achieve their mission-critical priorities today and build the successful organizations of tomorrow.

Our unmatched combination of expert-led, practitioner-sourced and data-driven research steers clients toward the right decisions on the issues that matter most. We are a trusted advisor and an objective resource for more than 14,000 enterprises in more than 100 countries — across all major functions, in every industry and enterprise size.

To learn more about how we help decision makers fuel the future of business, visit gartner.com.

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