Plan your Supply Chain Recovery During COVID-19 Pandemic

April 16, 2020

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The consequences of the COVID-19 disease on human health have been nothing short of devastating. The economic impact of this crisis, especially on the livelihoods of employees, is emerging as a major concern for the parties involved.

Organizations have toacknowledge and counter multiple elements at the same time while also having to focus on workers’ safety and safeguarding its operational efficiency in these times where the supply chain is witnessing a consequential instability.

Some organizations can take quick action and establish elaborate procedures to deal with crises. The focus is usually on short periods of time, but businesses can take steps that can be a preparation for medium and long terms.

In the present scenario, companies can take quick action across the end to end supply chain to tackle six significant issues. Ample knowledge of these issues can help in designing plans to mitigate the impact of current conditions and can be of help during future ordeals.

The following sections analyze key issues that can help in supply chain management.

Create transparency

Determine critical units of operations

One needs to determine the critical units of its operations while creating a transparent view of a multi-layered supply chain.

The origin of supplies from high-risk places and insufficiency of substitutes can be identifiable by working alongside operations and production teams while reviewing bills of materials (BOMs) and catalog elements.

Analyze the possibility of interruptions

Organizations can analyze the possibility of interruption after finding out about their suppliers’ information and designing information-sharing agreements.

It can be beneficial for organizations to stay in touch with all of their suppliers and create joint agreements to check inventory levels and lead times. Doing so can act as an early warning arrangement against interruption and can also help in creating recovery plans for important suppliers.

Gather information from various sources

There can be instances where tier-one suppliers are not communicative about data or don’t have complete visibility on their supply chains. In such cases, organizations can gather information from a variety of sources like shipment impacts, export levels across regions, and facility exposure by industry and parts groups.

Business organizations can purchase information from the databases of business data providers. Organizations can classify information to highlight crucial suppliers by using advanced analytical approaches and network mapping.

Opt for alternative suppliers

Where there is a high risk of production lines slowing down or completely stopping, organizations should opt for alternative suppliers when possible.

Businesses need to identify the different local policies (on travel restrictions and distancing requirements based on government guidance) and note the impact they can have on the availability of alternative options.

Companies can opt to work alongside with the affected tier-one suppliers if there are no alternatives available. Taking the specific problems of the supply chain into consideration allows for a speedy recovery after the crisis.

Estimate inventory

Businesses should keep track of all the inventory available in their supply chains, including spare items and re-manufactured stock. While estimating the inventory, companies can use the above supply chain transparency exercise. The key categories to estimate include:

  • The finished products stored in the warehouse and blocked inventory used for sales, testing,and quality control
  • The spare parts inventory can be re-purposed for the production of new commodities
  • The parts with quality issues or low ratings, after analyzing whether the rework can enhance their quality or if re-manufacturing them with used stock can help with supply issues
  • The parts in transition, while evaluating, can inform about the measures necessary to accelerate their arrival, especially those in quarantine or customs
  • There is an option to buy back the current supply stock sold to dealers and customers or organizations can go for cross-delivery transparency

Analyzing realistic customer demands

The demands for certain products may increase or reduce in times of crisis, which makes the estimation of customer demands more significant. Organizations need to double-check if the demand indications they receive are realistic and represent any future uncertainties.

Demand planning teams with the help of analytical tools can discover a reliable demand indicator to discern necessary supplies. Discussions with the sales and operational planning teams can help in forming more practical solutions.

The following actions can help in preparing for fluctuating conditions-

  • Designing a demand forecast strategy with a focus on the details and the time frame of the forecast is necessary to make well-informed decisions during the sales and operations process
  • Businesses can use advanced analytical forecasting tools to produce realistic forecasts
  • Organizations should integrate market intelligence with product specific demand models
  • To react quickly in case of inaccuracies, dynamic monitoring is necessary

Market insights, internal & external databases, and consumer communication channels give important information about the prevalent customer demands.

Reducing the size of orders and making sure they are constantly available and also including flexibility to contract terms can be beneficial to both the suppliers and customers. Prioritizing customers based on margin, revenue and strategic importance can ensure commercial continuity.

Optimization of production and distribution capacity

After equipping itself with a demand forecast strategy, an organization’s S&OP process’ next focus should be on its production and distribution capacity to understand financial and operational outcomes.

Optimum production of an organization starts with securing its employees. Using crisis management teams to communicate with the employees about the risks of the infection and informing them about options like home or remote working is necessary.

After analyzing the available capacity of an organization, a plan depicting the operational and economic implications of a continued shutdown is the next course of action. The products with the most strategic value, their earning potential, and their contribution to health and human safety, etc, influence the plan of the S&OP process to use the available capacity of a business.

A team with operations, sales, and strategic staff along with people who can integrate macroeconomics to the impact on business help in the analysis. A digital S&OP platform can prove to be better for planning production and supply chain in various situations.

Identifying and securing logistics capacity

The knowledge of present and future logistics capacity and associated exchanges can become more important in times of crisis. Logistics needs should become a priority to minimize a potential increase in costs. A collaboration with associates can prove to be very effective to increase capacity and ramp up production.

Keeping track of major changes like airports and borders closings and maintaining real-time visibility on logistics is essential. An alert and perceptive approach is crucial to adapt to environmental or conditional changes.

Cash and net working capital management

The longevity of the crisis eventually leads to slow sales, reduced margins, and constrained supply chains. These collectively add pressure on the earnings and liquidity of an organization. Forecasting applications of organizations can test the capital required on a weekly and monthly basis.

Decreasing the quantity of the finished goods inventory can lead to significant savings. Managing logistics smartly allows companies to reduce capital costs without any impact on the quality of customer service.

Elimination or reduction of non-essential supplies and testing suppliers’ purchase orders can lead to instantaneous cash inflow. Organizations can negotiate with supply chain leaders to discuss more favorable terms and control non-essential purchases by encouraging adherence to manufacturing models and current stock requirements.

For a resilient future

Designing a strong supply chain for the future after the addressing of immediate risks is essential. Incorporating procedures and tools into a formal setting after the crisis can be helpful for future emergencies.

Supply chain management digitizing can enhance the accuracy, flexibility, and speed of the entire process. The digitization of supply chain management can improve risk anticipation, visibility, coordination across the supply chain, and managing problems that arise out of growing product complexity.

Organizations should focus on building financial models that can estimate the impact of various situations. They can further help in the decision to undertake the necessary insurance required.

Addressing human issues and supply chain vulnerabilities faced by the government and companies is crucial. Even when the Coronavirus pandemic effects eventually recede, improving and strengthening the capabilities of the supply chain can undoubtedly act as preparation for future ordeals.

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