Strategies that you can adopt during and immediately after COVID2019
The spread of the new coronavirus, COVID-19, is being felt globally across operations in ways which are very difficult to model and assess right now. As the immediate toll on human health from the spread of coronavirus mounts, the economic effects of the crisis and the livelihoods at stake are coming into sharp focus.
With lockdowns and no sale scenario, the cash flows have been affected. Lot of the affected regions are at the centre of global supply chains. How long the situation will prevail no one has a definitive view. With joblessness and salary cuts, it’s hard to predict how the customer will behave and what changes this will bring in their demands.
Given the size of the crisis and the rate at which it is evolving, developing a coherent supply chain response to the coronavirus outbreak is extremely challenging. Businesses need to respond on multiple fronts at once: at an equivalent time, they need to work to guard their employee safety while safeguarding their operational viability.
Many businesses are ready to mobilize rapidly with a short-term focus, whereas this is the time when the supply-chain leaders must plan to steel themselves against the medium and long terms effects—and build resilience in their supply chains. Although its long-term consequences have yet to completely play out, the coronavirus outbreak already provides some lessons about how you can better prepare your company to affect future large-scale crises.
How the epidemic can impact the supply chains?
* 94% of Fortune 1000 companies are seeing supply chain disruptions from COVID-19
* 75% of companies have had negative or strongly negative impacts on their businesses
* 55% of companies decide to downgrade their growth outlooks (or have already done so)
* Source Accenture
• Materials: The restriction in movement of the various means of transportation, due to complete or partial lockdowns will lead to the shortage of raw materials and finished goods routed through logistical hubs. Also, the confusion of what is essential and what is not, adds up to the shortage.
• Labour: Shortage of labour is visible as people are moving back to their villages to save lots of them from paying rent and managing themselves without salary (which they foresee), this wasn’t envisaged as a part of the effect.
• Sourcing: With the travel restrictions and people being asked to work from home, finding new areas or vendors for sourcing as of now is going to be difficult.
• Logistics: Established hubs and supply networks may experience limitations in capacity and availability of transportation to move goods even if they are available. Finding alternative routes and means of transportation will become difficult.
• Consumers: Consumers could be more cautious in their purchasing habits due to the fear of being out and potentially exposed to the virus. This may lead to a shift towards online sales channels.
What businesses can do now?
• Rethink People Practices: People are important and a critical resource, their welfare is paramount. It’s going to be necessary to introduce or improve remote work policies, health & safety guidelines, hygiene practices for the protection of people.
• Maintain a healthy scepticism: Accurate information may be a rare commodity in the early stages of this emerging disaster, therefore, it is very important to think critically and engage with industry experts who can help you build an empirical view for decision making.
• Be Transparent: In multi-tier supply chains, it is important to establish an inventory of critical components, determine the origin of supply and identify alternative sources. Work alongside operations and production teams to review your bills of materials (BOMs). Identify those that are sourced from high-risk areas and lack substitutes.
• Take stock of inventory: Estimate available inventory along the worth chain, including spare parts and after-sales stock for using it as a bridge amid slow down in production to serve the customers.
• Assess customer demand: Assess realistic end-consumer demand, a crisis may increase or decrease demand for a specific product. Businesses should question whether demand signals they’re receiving from their customers, both short and medium-term, are realistic and reflect underlying uncertainties within the forecast. The utilization of AI will now be more prominent in improving the accuracy of forecasting.
• Optimize production and distribution capacity: The situation is very fluid; demand will change and there will be a shortage of manpower. The productivity per hour per person might fall. It is time to revisit the processes and optimise your production and distribution capacities accordingly. One must re-think the numbers basis the availability of manpower.
• Identify and secure logistics capacity: Estimating capacity, manpower need, scaling down or up wherever it is possible. Being flexible will enable businesses to respond better to any deviations or fluctuations.
• Manage cash and net capital: Run stress tests to know where supply-chain issues will start to cause a financial impact.
• Run outage scenarios: Assess the likelihood of unforeseen impacts. Expect the unexpected, especially when core suppliers are within the battlefront of disruptions. Simulations need to be administered. AI-based technology solutions can help in simulating these variations and can provide actionable intelligence.
• Create a comprehensive, emergency operations centre: Most organizations today have some semblance of an emergency operations centre (EOC), but in our studies, we’ve observed that these EOCs tend to exist only at the company or business unit level. These centres need to be exercised now, more than ever.
What do you have to be doing going forward?
The COVID-19 pandemic isn’t just a short-term crisis. It’s a long-lasting implication for the way people work and the way supply chains function. There’s a pressing need for businesses to create long-term resilience in their value chains for managing future challenges.
This requires holistic approaches to manage the availability chain.
1. Companies must integrate enough flexibility to guard against future disruptions by investing more in tech-based supply chain solutions that support applied analytics, AI and machine learning. It should also ensure end-to-end transparency across the availability chain.
2. Revisit your suppliers. Map your upstream suppliers’ several tiers back. Companies that fail to try to do this are less ready to respond or estimate likely impacts when a crisis erupts.
3. Re-visit business continuity plans. These plans should pinpoint contingencies in critical areas and include backup plans for
transportation, communications, supply, and income. Involve your suppliers and customers in developing these plans.
4. Revisit your procurement policy. Create alternate vendors. Lower the gap between L1 and L2. Choose the vendors for the same parts or
the same SKU from different locations.
5. Revisit your supply chain’s design:
a. Redesign with second sources. This supply-chain design provides backup capacity for supply, production, and distribution outages.
b. Redesign to source locally. This design involves a corporation to possess production facilities with local sources of supply in each
of its major markets. Rework on your constraints.
c. Check your transport modes. Check out the air mode to scale back the time between source and manufacturing or sales point. Start tracking your goods in transit more minutely.
d. Digitalise you supply chain to record your demands and every change that happens between demand and planning.
e. Ensure dynamic monitoring of forecasts to react quickly to inaccuracies. Use advanced statistical forecasting tools to get a sensible
forecast for base demand. Integrate market intelligence into product-specific demand-forecasting models.
These sorts of pandemics aren’t new to mankind. In 1919 the Spanish Flu also taught us few things. But off late we were engrossed into designing our supply chains to cater to the customer demands immediately that somewhere we omitted these sorts of situations.
Nobody ever envisaged that this will ever happen to such a developed world. We feel from now on the strategies will change. Organisations will create a “Risk Management Team” which can check out the availability chain holistically and can move towards digitalising the entire chain to bring it into one platform.
Business leaders ought to make fast & intelligent decisions to preserve enterprise operations to serve their clients and including protecting their people.
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