7th July, 2020
Supply chain strategies for 2020
Immediate action, long-term planning
When news of COVID-19 first broke, the primary concern for companies and governments was to minimise the spread of the virus. But it didn’t take long for the spotlight to land on the world economy.
China was the first to close its doors with over 90% of its active businesses affected according to recent Dun & Bradstreet data. As the world’s second-largest economy, this caused major interruptions to international trade with at least five million companies around the world somewhat affected. More border closures, travel restrictions and quarantines further suspended business operations, bringing international supply chains to a screeching halt.
Then there are the essential services that must continue to operate throughout COVID-19. Their supply chains are under immense pressure to deliver while navigating new health regulations and panic buying.
During a health crisis of this magnitude, there are several factors that will slow down operations – factory closures, limited supply, delayed production, freight and bottlenecks in fulfilment. And if you have customers ready to buy, but nothing to sell to them, that’s an issue.
There are immediate ramifications that you’ll need to manage now, and longer-term impacts to consider and plan for. Here’s how to get your supply chain under control, even while COVID-19 still has its grip on the world.
Tackle short-term implications first
Identify potential risks
Your goal in the short term is business continuity. As Forbes suggests, now is the time to identify the weak links in your supply chain – they’ll be there. Start by asking yourself, “What are my business-critical components?”
Work with your existing suppliers, operations, and production teams to identify where you might run into trouble sourcing parts from high-risk areas and where you lack options for appropriate substitutes.
Demand for local, domestic, and international freight and logistics will soar, so make sure you consider how you’ll manage any capacity shortages.
Create contingency plans
Hope for the best, but plan for the worst. Be prepared for any scenario with strategies you can implement should existing disruptions continue or new challenges emerge.
Review your entire supply chain – not just production and fulfilment. Consider any customer-service operations that are outsourced to international third-party contractors – and have a back-up plan.
Look to diversify your suppliers
Alongside creating a business continuity plan, look for ways to diversify your supply chain and safeguard against shortages. The more suppliers you have, from as many different territories as possible, the more you’ll safeguard your supply chain – COVID-19 isn’t hitting countries all at once, so as one country locks down, there’s a chance others will be opening again for business.
When adding new suppliers, simulate the supply chain and analyse the changes before making anything permanent.
Share and collaborate with others
Potentially, you won’t be able to service your usual customer markets while the virus keeps many borders closed. If this is the case, consider using your resources differently or collaborating with a similar company to overcome this – like fashion designers around the world who have begun making face masks amid the shortages, as CBS News reports.
Be ready to cope with a surge in demand
Tagged #toiletpapergate on social media, the humble loo roll was the original panic-buy product of choice. Supermarket shelves were cleared, and retailers implemented strict buying limits.
A steep increase in demand is a nice problem to have, but means you have to shift your entire supply chain up a gear. Manufacturers must increase their output, and supply chain operators need the manpower and resources to distribute goods quickly.
Manage customer experience
Operating hours and delivery times will be unpredictable and out of your control. Make sure your customers know this by leveraging direct-to-customer communication channels. Reassure your customers with regular updates.
Create long-term strategies
Once you’ve dealt with the immediate risks to your supply chain, you need to think beyond the crisis. Design a resilient supply chain and monitor vulnerabilities continuously.
Learn, and adapt your business continuity plans
COVID-19 will have exposed choke points in your supply chain. Learn from your recent challenges, reshape processes to fix the areas where things have fallen short, and redefine business continuity plans to protect your supply chain moving forward.
Global versus local supply chains
During a crisis, consumer preferences and needs can change quickly. On top of that, global supply chains will continue to be unreliable for some time. Start to consider the global versus the local mix of your supply chain and look to partner with local manufacturers and transport logistics to spread the access and risk.
Changes in forecasting
During a recession, it’s hard to estimate realistic final-customer demand, but it’s even more important. Some companies will experience a sharp drop in demand, while others will need to move at a rapid pace to keep up.
Use market insight tools, databases and direct-to-consumer communication channels to assess the current state of demand. Tim Ryley, chief executive of business software implementation company Endeavour says good ERP systems have the power and efficiencies to sustain manufacturing operations with accurate forecasting capabilities.
“Effective Enterprise Resource Planning (ERP) platforms will have forecasting tools that allow you to model the impact of changes as information inputs change (sometimes almost dynamically) and to predict the impact on stock levels, ability to supply customers, and make decisions to optimise business performance in a difficult time. Some will be able to use these tools further to take advantage of new opportunities that arise particularly in competitive situations where others struggle to manage their inventory and supply effectively”.
When data sources are limited, have a conversation with your customers directly to fill in some of the gaps.
Tread carefully when it comes to price
While demand is causing supply chain shock and cost fluctuations across the board, be mindful of any short-term pricing changes.
When Kiwi supermarket giant Countdown axed its weekly specials during the country’s level-four lockdown, the decision didn’t go unnoticed. The NZ Herald reported one shopper dubbed the lack of specials as “non-Kiwi”.
Consider how this may impact on customer trust and loyalty now and in the future.
Bring innovative technology into supply chain activities
According to Deloitte, investment in new technologies will drastically improve visibility across the end-to-end supply chain and support responsiveness. Using digital technologies to assess risk and simulate demand will help you spot supply chain disruptions even before they become an issue. Having visibility of inventory across your network will allow you to best serve your customers, despite supply limitations.
Safeguard and optimise your operational viability
The health and safety of workers must be your number one priority, but as the pandemic subsides, your task will be understanding supply chain risks and capabilities, to prepare for the inevitable economic backlash.
Look for opportunities to create a domestic supply chain, as the international market will take longer to reboot. Focus on building long-term solutions so you emerge from this crisis better prepared for the next one.