Managing the Supply Chain Disruption in The Covid-19 Era
Supply Chain is considered as a backbone of any organization in the world, COVID-19 has uncovered weaknesses in many organization’s supply chains, and finally forced many companies, and entire industries, to reconsider and transform their global supply chain model.
The COVID 19 pandemic continues to transform the way we live and work whilst disruption of the businesses across the world. As government and health officials track the virus and make decisions regarding its containment, supply chain front-runners assess and plan for how the virus will impact their systems/organizations.
The coronavirus pandemic is bringing most key business activities to a near complete halt. Covid-19 is having an unprecedented effect on economy globally. While communicating virtually individuals have become more inclined towards technology advancement due to which in the coming years there would be an adoption of various technologies.
Apparently overnight, supply chain market is most worried as far as possible. Long periods of forceful lean single-source inventory network tasks and hyper-speed agile product improvement strategies uncover the delicacy of numerous organization supply chain practices.
Limiting the Impact on Your Supply Chain…
Virtually every industry has been plagued by the COVID-19 virus, which has caused major disruptions in supply chains that organizations must scramble to repair. Supply chain managers must answer a way to source parts or components supplied by countries that are hard-hit, like China, Italy and Spain, and will be scarce or unavailable. Suppliers should also make sure that supply chains are resilient within the face of emergencies beyond the COVID-19 pandemic. they need to be ready to quickly and flexibly route supply chains around stricken geographies and reliably identify and switch replacement components if any are unavailable.
COVID-19 has exposed weaknesses even for the big global players. On the one hand, the ever-evolving trend in procurement over the last two decades i.e. to source key-components and raw materials from low cost countries like China yielded savings for procurement departments; on the other hand, it has now exposed over-reliability on the suppliers from these geographic regions.
Distribution of products goes through some unique challenges like staffing of warehouses, a requirement for direct distribution and more intelligent and responsive allocation across channels. Retailing is additionally been impacted in a peculiar way.
On the buyer side, hoarding/stocking of essential commodities and over-the-counter medicines has led to unusual stress on the provision chains. it’s commonplace for consumers to panic stock food and other essential commodities during times of crisis. While this ends up in stress if the stockpiling goes beyond some weeks, it’s natural for consumers to be concerned about availability and resort to the current reasonably behavior. This unnatural spikes in demand and therefore the required supply fluctuations are extremely difficult to handle and together create a bullwhip effect within the entire supply chain often resulting in artificial shortages
It has forced the companies to analyze and think for implementation of the global footprint of their supply base to avoid supply-side risk from one geography. The crisis has shown that organizations that have developed and implemented supply chain management processes, as part of their SRM framework are prepared better to mitigate the business impact.
With 175+ countries impacted by this global pandemic, the full impact of COVID-19 on supply chains is still unknown but has already started putting a huge pressure on world economy. However, one thing is for sure—it will have global financial and economic complications, that will be felt through global supply chains, from raw materials to finished goods.
Middle Eastern Economies Are Facing A Three-Way Battle on The Economic Front
The Middle East’s role in connecting trade between China and the rest of the world leaves air cargo operators in the region ‘significantly exposed’ to the impact of Covid-19, the industry’s leading body has warned.
Middle Eastern countries are witnessing two-fold impacts due to the virus outbreak. It is not only depended on Chinese suppliers just like the rest of the world for their industrial production, but it is also dependent on China on demand-side for its massive oil reserves.
China, the biggest importer of the Gulf oil in the world, has seen the oil consumption plummet by 3 million barrels per day, which is close to 20% of its consumption. The Middle Eastern economy is trying to diversify its portfolio in the past several years to reduce its economy’s massive reliance on oil money. After oil and gas, the region’s economy is highly dependent on tourism and capitals market for its sustenance.
Hence, a robust supply chain management tool or strategy to assess risk, will help organizations to gain more visibility into their extended supplier network and identify their potential risk. The organizations that have successfully been able to reduce the impact of a global pandemic, have diversified their suppliers across the geographies to multi-source key commodities or strategic components to reduce their dependence on a single supplier.
The Biggest Question for Companies, What Next?
Now is the time for many companies to assess how well they are equipped to manage a crisis and what they need to do to safeguard business continuity.
Procurement and supply chain executives should review their material in-hand and develop an increased amount of distinguished strategies for each sub-group of materials i.e. have a clear idea of the components that are sourced from high-risk areas and readily available substitutes.
- Estimate realistic end-consumer demands
- Identify resources of reliable replenishment
- Estimate inventory needs to be stocked
- Ways to expand supplier networks and best utilize them
- Look for local sourcing
- What about pricing?
These are tough questions, especially for organizations that do not have the right expertise and technology solutions to support decision-making processes.
Leverage Next Gen Technologies to Be Future Ready with Citrus Consulting
During the current COVID-19 crisis companies will be putting on hold some IT initiatives and resources planned towards innovation, process automation, etc. and focus more on collaborative applications and infrastructure support to enable new ways of working and better manage the short-term implications.
However, moving forward, organizations will start focusing on solutions that support advanced planning and mitigate the impact of similar events in the near future or long-term. Customer organizations need to plan and evaluate how Supply Chain Management solutions can better prepare them for demand fluctuations, macroeconomic instability, and challenging conditions.
Preparing for the post COVID era would be a strategic call over a tactical one, Citrus Consulting can help you prepare for the next disruption
- End-to-end Stock Visibility
Organizations need to have a clear visibility of stock in their warehouses, in store, seasonal selling patterns i.e. what is selling at what time, and where, so they can quickly react to changing conditions and customer needs. Having integrated system to have a visibility on inventory across channels/warehouses in a single database is crucial. This not only enables organizations to make rapid and agile refill and stock transfers — it also means they avoid overspend on inventory.
- Standardized Automation
IoT devices are embedded into manufacturing, production and distribution. Manufacturing plants are already highly automated. IoT devices can automate and standardize processes to create them faster. within the tissue supply chain, if it were possible to automate and standardize the applying of bar codes
- Enhanced Logistics
IoT devices can track in real time the situation of components and distribution vehicles. In a perfect IoT-enabled world, a retailer could quickly locate a fleet of trucks distributing commercial products and commission them to deliver to retail locations.
- Analytics and Artificial Intelligence
Deploying tools and developing models with strong analytics capabilities will enable organizations to forecast demand, respond to changing market conditions, improve distribution accuracy, and suggest better allocation and replenishment strategies. By analyzing internal and external data, supported by AI, we can develop scripts that can work on scenario based “what-if” conditions, creating complex models to plot the best course of action.
- Predictive Analytics
With a properly outfitted IoT network, manufacturers should be able to quickly determine that a supply chain is overwhelmed and locate alternate supply chains and component sources.
- Geospatial Modeling and Visualization
Use advanced analytics and visualization tools to analyze your supply network resources in your data model to a global map that can then be used see the global operating picture of the supply chain—factories, suppliers, stores, and distribution and understand all network connections, complex relationships, and potential impacts.
- Develop Rich Metadata
To link the supply network data model to other external data sources such as device data (the internet of things, IoT), regulatory compliance data, benchmark data, market intelligence data feeds, geospatial content feeds and so on.
- Advanced Procurement Analytics
The advanced procurement analytics help organizations to get a consolidated view on procurement spend. Initially offered through one-off projects such as spend cubes, procurement analytics has evolved to encompass a number of specialized solutions, dashboards and types of automation software. Using this strategy, organizations have realized that the value comes more timely, in form of accurate and actionable insights, and the ability to measure procurement’s contribution to the bottom line.
By having the robust data model, individual IT systems in areas such as direct sourcing, supply chain, GRC (governance, risk and compliance), and others can be just tied back to the physical supply chain, also enriched and analyzed together for use in descriptive analytics, predictive analytics and prescriptive analytics.
Looking Ahead: The Imperative for A New Supply Chain Model
Post COVID-19 pandemic, organizations will identify metrics that outline success or failure and use analytics and simulation to succeed in a balance between highly optimized processes and a sober ability to accommodate the severity of shortage, misallocations and instability of local manufacturing. Organizations should pursue two long run adjustments: developing a productive globally distributed workforce and updating their supply chain assumption, models and practices.
Fortunately, new supply chain technologies are evolving that help to improve visibility across the end-to-end supply chain, and support companies’ ability to resist such shocks. The existing linear supply chain model is transforming into digital supply networks, where functional silos are broken down and organizations become connected to their complete supply network along with end-to-end visibility, collaboration, agility, and optimization.
Leveraging advanced technologies such as the Internet of Things, artificial intelligence, robotics, and 5G, these digital technologies are designed to anticipate and meet future challenges. Whether it is a pandemic event like COVID-19, trade war, act of war or terrorism, natural calamity, regulatory change, labor dispute, sudden spikes in demand, or supplier bankruptcy, companies that adopt digital technological/analytical methods to have end-to-end visibility of their Supply Chain Network, will be ready to deal with the unexpected.