Prepping the Supply Chain for a Disaster
As the spread of the novel Coronaviral (COVID-19) expands, the pandemics affects of social distancing and lockdowns will take its toll on the economy and our livelihoods. In these times access to basic and essential goods becomes vital. And a as a result, the supply chain is in sharp focus.
Advice from Analysts
Though it is difficult to predict the exact consequences of coronavirus, Gartner indicates that organizations might begin to see impacts across the supply chain, including:
- – Materials: Supply shortages of materials or finished goods coming from or routed through logistical hubs in impacted areas.
- – Labour: White- and blue-collar labour may not be available due to quarantine guidelines or illness.
- – Sourcing: Travel may be restricted to certain areas, limiting the ability to discover, qualify and certify new business or programs and to transact business.
- – Logistics: Established hubs and supply networks may experience limitations in capacity and availability so that even if materials are available, they would be stuck elsewhere. Finding alternative routes and means of transportation will become difficult.
- – Consumers: Consumers may be more cautious in their purchasing habits due to fears about being in public and potential exposure to the virus. Many may turn to online sales, challenging logistics networks.
But how does one ensure that their supply chain is robust enough to safeguard their operational viability, while ensuring they protect their workers’ safety? McKinsey provides a great framework with which to tackle the current and potential future challenges. But the common thread is having line of sight of your entire value chain.
- 1. Create transparency on multitier supply chains, establishing a list of critical components, determining the origin of supply, and identifying alternative sources.
- 2. Estimate available inventory along the value chain—including spare parts and after-sales stock—for use as a bridge to keep production running and enable delivery to customers.
- 3. Assess realistic final-customer demand and respond to (or, where possible, contain) shortage-buying behaviour of customers.
- 4. Optimize production and distribution capacity to ensure employee safety, such as by supplying personal protective equipment (PPE) and engaging with communication teams to share infection-risk levels and work-from-home options. These steps will enable leaders to understand current and projected capacity levels in both workforce and materials.
- 5. Identify and secure logistics capacity, estimating capacity and accelerating, where possible, and being flexible on transportation mode, when required.
- 6. Manage cash and net working capital by running stress tests to understand where supply-chain issues will start to cause a financial impact.
Steps to Protect your Supply Chain
Based on the above recommendations, we uncover the key areas one should look at when prepping the supply chain for a disaster such as COVID-19.
Having a consistent supply of raw material and components is imperative. The ability to source and secure critical supplies is vital to creating the basic product and meeting your commitments. Tight relationships and constant communication will help weather the storm. However, having a ‘Plan B’ for alternative sourcing won’t hurt.
Optimize Route to Market
When distribution and travel is restricted, ensuring that your routes are perfectly optimized is vital. Having a clear understanding of who is available, what routes are active, and what the retailer needs, and expectations are. An agile fleet will be able to keep a constant supply of goods are delivered and available to shelved.
The number one rule for Consumer Goods brands is keep your stock on the shelf. Brand loyalty plays very little part in the decision set – availability is king. With restricted field force movements, retailers are curbing the number of merchandisers on the floor. Brands need to be smarter at how they predict stock levels at merchant level. Access to EPOS data in real time enables the brand to better predict demand and ensure the supply is available.
Line of Sight through Data
FMCG companies should leverage the efforts to digital transform the sales and operations within their route to market and combine the end result retail transactional data to gain clear line of sight of the entire supply chain. In so doing, these supply chains can offer true Just in Time production and delivery by understanding consumer buying patterns and adapting in real-time to any changes and fluctuations.