Supply Chain Management during Covid 19

The Covid 19 crisis will change the way businesses would be run and in particular, how supply chains would be run.

Never before has the supply chain and logistics function been at the centre stage as it has in the past 2-3 months. Cities, districts and governments the world over have been at the fore-front to ensure un-interrupted supplies of essential items such as food, groceries, medicines and personal protective gear.

I have had the good fortune of attending a few webinars over the past two weeks.

What follows is a summary of key points, thoughts, ideas and highlights discussed by supply chain heads of various industries:

Supply side

The sudden shortage and absence of manpower in various production units poses a challenge. The restrictions on account of the lockdown has impacted the movement of workers. However, companies have made arrangements for key personnel to be stationed close to the production plants so that supplies do not get affected.

With regard to supplier management, firms have revisited their contracts and modified existing terms and conditions to enable smooth flow of essential components, packaging materials and other raw materials.

Companies in the personal care and consumer space have also managed to get new service providers on board in a matter of weeks to ensure adequate pipeline inventories. It is amazing to see how innovation, trust and relationship management have taken center stage and are playing a key role to ensure that material flows are effective and timely.

Frequent communication between all the stakeholders has been very crucial too.

Product rationalization has enabled many firms to reduce their product portfolio and focus on SKUs that are essential and critical at this stage. Many SKUs have been kept out of the planning cycle. This would lead to higher production runs and more quantities of essential SKUs.

All of the above have entailed a re-look at our upstream strategies and a deeper understanding of related processes and policies.

Demand side

Conventional demand planning processes may prove to be ineffective going forward. S&OP and IBP would be used more from a long term resource and capacity planning perspective. Historical data and time series forecasting models may not be effective given the evolving situation in the marketplace.

Flexible planning and scheduling systems, what-if analysis and scenario based planning could be more useful in these difficult and uncertain circumstances. Short term planning and daily analysis of key performance variables would facilitate efficient distribution and product placement.

DDMRP or Demand Driven Material Requirements Planning approach needs to be adopted wherever possible.

With regard to logistics, distribution and customer service operations – omni-channel strategies would see higher adoption; also, certain CPG and FMCG companies have begun creating partnership models with last mile transportation companies to enable timely deliveries.

Supply chains need to be more agile, responsive and flexible during these times. Even in good times, investments in people, process and technology leading to more flexible and responsive supply chains would be worthwhile in the medium to long term.

Demand for sanitizers and masks has shot up by more than 30-40x in the last two months.

It is in this scenario that demand shaping and demand sensing capabilities would assume great importance.

Never before have global supply chains been put under such enormous stress.

Some best practices and key learning from companies have been summarized below:

• Supply chain partner and stakeholder collaboration
• Daily communication
• Learning from one another
• Demand Driven MRP processes; ability to shape and sense demand
• Creating an operations excellence culture
• Focus on supply chain design
• Training, re-skilling and up-skilling should never stop
• Investment in market intelligence and studying consumer behaviour is very important
• Omni-channel distribution strategies are helpful
• This is the best time to invest in supply chain automation and related technologies
• Product segmentation and rationalization are essential as they would enable better resource utilization and inventory management
• There is a need to manage cash flows efficiently; working capital management has taken centre stage; innovative trade finance models could be used
• Asset sharing models would become a reality – production assets, transportation and warehouse assets could be shared
• Deployment of Environment, Health and Safety (EHS) systems across sites and facilities would be critical
• Supply chain risk management and enterprise risk management systems would be a part of S&OP and IBP processes
• Making businesses interoperable would enable quick response
• Business continuity plans have and would assume great importance at all functional levels

In conclusion, this pandemic has severely tested the resilience, collective might and talent of supply chain professionals across the globe. The next few months will again underscore and bring forth the vital role that our function plays in keeping the wheels of local and global trade moving.

This may be an appropriate time to reflect on the concept of “The Triple Bottom Line” – Economic, Social and Environmental aspects of business.

At the moment, the social aspect has gained significance and rightly so.