The criticality of supply chains in our world always comes to the fore when a crisis arises and the current COVID-19 pandemic is no exception. With a shrink in demand for everyday goods and services, the global economy is heading into a recession and depression that may leave us with devastating cost impacts. Already, prices to move cargo have skyrocketed due to availability of cargo-only planes and blank sailings for ocean routes are now the norm. Notwithstanding the current travails we face, there is no better time for businesses to rethink their supply chain approach in order to effectively improve visibility, manage inventory and cut cost while minimising risk, possible bullwhip effect and shocks incurred by the current irregularity. Here are four implementations to consider:
- Local Ecosystem Development— The immense benefit of globalisation today has afforded businesses the opportunity to effectively coordinate demand and supply from separate geographical locations. From raw materials delivery to production and distribution, businesses have successfully built connecting links across borders that ensure and maintain efficiency, cost control and reduced customer waiting time, the results of which have enabled us pick up bananas grown in Ecuador from our nearby retail store in Cyprus, and order prefabricated materials in China for assembly in the Democratic Republic of Congo. No doubt our supply chain system has benefited from an efficient multilateral management of networks but the current pandemic and it’s disruptions have revealed shortfalls we must address. Consequently, an over reliance on a global supply chain model without developing local resilience and agility can lead to a weak and incapacitated ecosystem unable to meet demand when global crisis of this proportion reoccurs. The automotive, food distribution and medical industry have been the worst hit this time with the latter being particularly overwhelmed globally and without a local action plan in effect, firms risk shortage of critical supplies post crisis to meet everyday demand. Businesses should therefore look to strengthen their local ecosystems to ensure resilience, resource availability and capacity to adequately satisfy demand without compromising on performance standards in the event of future crisis.
- Contingency Planning — Aside the urgent need to fortify her local ecosystem against future shocks, the tactics and strategy regarding contingency planning for businesses should be reanalysed. Studies reveal that relatively few companies have a detailed and tested plan lasting beyond six months in the event of a crisis and given the current outlook, a vaccine for COVID-19 is not expected till 2021. How then can businesses survive? To cushion the impact of the current crisis in the near term, procurement and production departments must apply tactics and devise plans that can enable them meet demand(essentials only if necessary). Most global supply chains today are reliant on China’s labour and cost cutting capacity; and with her factories being shut for months, only having reopened recently, the need to create similar test scenarios of interruptions and plan accordingly arises. Scenarios that include assessing supplier locations and diversification need to be considered and reconsidered intermittently to ascertain stability while also working with local and existing suppliers to gain knowledge on stock, production and their contingency plans. In order to keep head above water, a few companies have delved into producing only essential goods in the interim but on the long run, a tested contingency plan and strategy against disasters, linked to cross-functional departments will reconcile supply and demand efficiently for several month cycles leading to minimal disruptions. Alongside sufficient stockpiling, agility in production, tiered sourcing and robust supplier relations, multi year plans constantly reevaluated and coordinated by cross functional teams will enable businesses not only gain leverage in trying periods but also thrive and solidify industry presence in preparation for unanticipated shocks in the future.
- Sustainable Chains — The outbreak of the COVID19 pandemic has sharply brought into focus what should matter in our world. For so long, businesses have traded environmental protection and going green for capitalist prosperity and a healthy bottom line. Whilst we should not negate the need for cost control and flexibility, the collapse of the existing system should alter our current performance benchmark on cost cuts and drive us to redesign our process with the aim of paying more attention to our environment, its needs and yearnings. An approach that is people, planet and profit lead is achievable with holistic collaboration amongst competitors, incentivization from regulatory authorities and the determination to reinvent production through innovative capacity building with Eco-friendly suppliers. A perfect example of a company practising this is woven shirt manufacturer, ESQUEL. By making structural changes to its production and manufacturing capacity and working with local farmers to develop sustainable farming techniques through an internal project tagged “integral”, ESQUEL’s Eco-friendly investments over the past decade has successfully improved their manufacturing process, enabled them pay farmers more and ultimately deliver environmentally friendly merchandise globally. The company currently produces over 100 million garments yearly for leading brands like Nike, Polo and Hugo Boss with an annual turn over $1.3 billion. While moving towards sustainability may require long term investments for companies with no assurance of reward being their main turn-off, ESQUEL’s model and financial performance proves that properly planned sustainable chains lead to improved revenues and solid bottom line growth. As Epidemiologist and Scientists predict possible occurrence of future pandemics, the lessons learnt from this will equip us to better prepare for the future with a focus on responsible procurement, green sourcing and Eco-friendly initiatives.
- Data Synchronisation — There exist a lot of cross system silos today in the supply chain process of businesses and these can be attributed to collaboration gaps between cross functional teams and a dependence on an age long manual process cycle for order management and fulfilment. Despite availability of tools to check this, the recurring bottlenecks have increasingly impacted the ability of businesses to gain value from their data owing to several blind-spots and insufficient data mining. The post COVID19 era will require a heightened efficiency from businesses and as such, internal management and control of it’s end to end process is key. Cross functional teams and decision makers who onboard data visualisation and mining tools into every facet of their organisation will gain deeper insights and benefit from readily accessible data to deliver excellent customer service experience. The usage of predictive analytics tools such as SAP, ARIBA, TABLEAU and others avail businesses the opportunity to analyse their data for optimisation and efficiency across a wide range of fulfilment spectrum such as procurement, manufacturing, logistics and general operational capacity. Successfully measuring and utilising gleaned data in this regard ultimately leads to a more intelligent inventory management cycle, risk mitigation, discovery of new demographic areas as well as touch-points for customer service consolidation.
Even as the COVID-19 catastrophe is set to potentially change the way we conduct business forever, global supply chains have long needed a revamp and overhaul of it’s foundational structure to reflect actionable data transformation, resilience and sustainability. While this is not the disruption envisaged, it’s devastating effects on various economies should serve as a wake-up call and enable us be proactive for posterity.