Three actions to take now to protect a healthy supply chain during uncertain times

At this point in time, nearly a third of the world’s population are living under quarantine, millions are following strict social distancing rules, and thousands of ‘non-essential’ businesses have been temporarily shuttered in an effort to slow the spread of COVID-19. As a result, companies across all industries are navigating an unprecedented level of uncertainty. Now, more than ever, it is critical for companies to fortify supply chains, ensure a consistent and reliable supplier network of goods and services, and enable real-time decisions to respond to daily (and sometimes hourly) changes to the global supply chain and overall economic environment.

It is easy to understand why business leaders are focusing most of their energy on today’s challenges without considering how their company may look in a month, much less how they might chart a path to recovery after the pandemic. Tomorrow’s company may look and feel quite different than what is in place today. As with all crises (think back to the Great Recession of 2008), the most innovative companies will succeed and even thrive in these uncertain times. The key is determining what you can do now to make sure your company is among them!

1. Monitor the current state of your supply chain

Many companies are experiencing demand fluctuations, decreases in transportation availability, and employee health uncertainty, which can lead to supply chain vulnerability:

• Demand fluctuations: Over the last month, sales of consumer paper products have increased between 50 and 75 percent. Significant spikes in demand on certain products, particularly in household cleaning products and groceries make it challenging to maintain sufficient supply.
• Decreases in air freight availability: As passenger travel has dramatically declined (domestic carriers have cut their flights by 70–90%), available cargo capacity has been severely affected, further decreasing ability to transport critical goods and services.
• Employee health uncertainty: If the pandemic is worse than anticipated, spread of the disease to drivers and logistics staff can directly impact ability to deliver goods.

It is critical to keep the following operational in the immediate term:

• Product movement: Production and trucks continuing to move goods across the country (fuel, food, spare parts). We are already seeing some jurisdictions suspending heavy truck weight minimums to allow maximum capacity shipments.
• Workforce: As social distancing continues to be encouraged or mandated, the ability to productively work remotely is critical to maintain operations.
• Stability: Ability to transfer knowledge for logistics and critical staff in the event of absenteeism (pharmacies, grocery stores, clinics, etc.).

2. Build resilience and flexibility

No one expected the strength and scale of the COVID-19 pandemic, but now that it’s here it’s important not to fall into a pattern of reactive behavior. Instead, resilient companies are establishing practices to help anticipate imminent supply chain threats:

• If you haven’t already, create a pandemic response team with key stakeholders to make constrained decisions; meet daily and report directly to the C-suite or executive leadership team.
• Maintain consistent communication channels with suppliers and customers to understand needs and respond quickly
• Be agile and expedient. Focus your time on testing potential solutions instead of ideating on a perfect solution.
• Review your product segmentation strategy. Tailor solutions to the “A” products, or adapt to new products that can directly support renewed customer demand in the face of the pandemic.
• Map the supply chain, including tier 2 and 3 suppliers, then compare to a map of the pandemic; if key suppliers are in the most hit hard regions, consider back-up suppliers and frequent communication to ensure continuous operations.
• Map your customer base and use the data visual to identify opportunities to optimize the supply chain (e.g. Can you ship directly to a customer/store?)

If there are in-flight initiatives that are considered innovative or industry best practices, consider accelerating in these areas (e.g. telemedicine in healthcare, eCommerce for small businesses, and data-driven predictive analytics). Your pandemic response team referenced above can serve as an innovation think tank, recommending shifts in the company’s strategy to ensure social responsibility and production pivots if possible. We are seeing this behavior with breweries shifting to production of hand sanitizer and large manufacturing companies like GM, GE and Tesla committing to producing ICU ventilator machines.

Protection of all workers is critical, and we are seeing a massive shift to remote work for employees. If you haven’t already, shifting in this direction, where possible, will increase the likelihood of a healthier workforce, reduce absenteeism, and enable your company to be socially responsible by reducing the risk of transmission.

For businesses large and small, consider expanding your supplier base for more cost-effective raw materials and reliable logistics network. If possible, pivot to lower cost production across all levels of the supply chain (procurement, production, and distribution) and work with downstream suppliers to help them remain in business. As we’ve seen, if one link in the supply chain breaks, there can be widespread impacts.

3. Plan for recovery

Leadership, employees, investors and other stakeholders will want to know how you will navigate the recovery post-crisis. When devising your longer-term plan, consider the following:

• Shift the focus toward building scenario plans using what-if analysis (peering 6, 12, 26, and 52 weeks in the future).
• To reduce the supply chain inefficiencies due to the fluctuation in supply and demand (or the bullwhip effect), build your demand picture on downstream data instead of historical sales.
• Assess alternate sources of supply and diversify the geography of suppliers.
• Build flexibility into manufacturing and distribution, increasing automation where possible and reducing reliance on high-touch human intervention/reliance.
• Enable end-to-end visibility across the supply chain to increase ability to adapt.
• Build resiliency by incorporating risk analysis in your supply chain strategy.
• Create a roadmap of prioritized digital opportunities that will strengthen supply chain agility and drive future business value.

In healthcare and life sciences industries, the most successful companies have focused on data-driven insights and implementation of a telemedicine strategy, which enable increased physician engagement, physician productivity, and patient satisfaction. Leveraging predictive healthcare analytics will allow you to model future epidemics or pandemics, as well as other human behavior that will drive demand in medication and other healthcare products and services.

In retail, consumer products, and manufacturing industries, continue to prioritize the most important products using data and analytics. Determine realistic forecasts amid fluctuating demand signals and identify areas for increased automation throughout the supply chain. This will allow less reliance on human presence, reduce human error, and enable people to shift their focus to more strategic tasks.

Small businesses will face a daunting, but not impossible, recovery challenge — requiring small business owners to ensure clear and transparent communication channels with customers, leverage speed of execution to generate new products/services, enable quick access to available business resources, and support hyper quality improvement innovation. Agility in these areas can be an advantage for small businesses, as larger companies might not have the ability to be as nimble.

Summary

Barring a complete breakdown of physical distribution, our complex supply chains are still the most efficient way to distribute products, including medicines, to those areas in most need. Economic uncertainty, recessions, and pandemics can force companies into survival mode, but these challenging times also enable a shift in focus to product/service innovation. Even companies that depend on the close proximity of customers (e.g. gyms, cycling studios, and yoga studios) are finding innovative ways to survive, including lease / personalized home delivery of cycling machines and personalized daily workouts. What shifts in your products/services strategy will allow your company to thrive?

If you would like to have a discussion around how to proactively address supply chain concerns related to COVID-19, we have a team of supply chain subject matter experts that are here to help. To learn more, contact Andrew.camilleri@slalom.com.

Sources cited:

• Manners — Bell, John; Supply Chain Risk Management, 2nd Edition

• Lynch, Gary S.; Single Point of Failure