The Covid-19 aftermath is our minds. We are thinking about the recovery, what would be the long-term impact on people and the economy? How would the supply chains recover? How would businesses think about this going forward?. As supply chain professionals, we have seen disruptions before and we will see them again in the future. "You can't stop the waves, but you can learn to surf."
Let us start with some facts:
Supply Chain disruptions are NOT new. There have been disruptions in the past - Epidemics, natural disasters and politically created ones.
You cannot predict disruptions like Covid-19. Ok, Bill Gates predicted in 2015 but said "We are not ready" for it and he was right.
Supply chain strategy is enslaved by the business strategy. If the business strategy is to minimize the costs then supply chain strategy would serve that without much regard for 'balancing' the risks that are associated with it.
In supply chains the 'urgent' always take priority over the 'important'. Maybe (just maybe) not anymore. Hopefully the Covid-19 experience gives the 'important' in supply chain its deserving place.
You can't stop the waves but you can learn to surf
The WHO was notified of an infected cluster in Wuhan on 31st December 2019. Wuhan was quarantined on 23rd January and the rest of Hubei province few days later. So you had about a month to find another supplier/s, top up your inventory buffers, expedite shipments, move your supply chain out of China or all of this in about 30 days! We wish supply chain decisions and changes could happen this fast and easily. You cannot predict the future but hindsight is 20-20. When the next disruption starts rearing its head, you better be ready with a framework, data and tools on Day 0 to make the best decisions for your business. Below are some pointers on what is important going forward with regards to supply chain planning (This is not a comprehensive list but some initiatives that would help you prepare for the next disruption).
Methodical, Data-Driven and Balanced Supply Chain Network (Re)Design
Your supply chain and logistics footprint holds, at minimum, 5 to 10% cost saving opportunity. Even before the pandemic, there had been a clear trend of companies trying to diversify their supply chain from China to other countries, due to trade wars and tariffs. This trend will now accelerate. According to McKinsey's March 2020 Global Survey , 87% of respondents said their companies will alter globalization strategies in the next three years. Respondents were more likely than they were in December to say that the strategic changes at their companies will include diversifying supply chains across countries and sourcing more from regional supply chains.
It is not about re-shoring, near-shoring or on-shoring but right shoring
It is important that you design and optimize end-to-end network using a balanced scorecard. Alternative suppliers, manufacturing sites, product flow networks, logistics modes need to be analyzed across multiple factors - total landed costs, service levels, inventory, lead times and supply chain risks. Lowest cost supply chain footprints could be risky while risk-averse footprints could come at a premium. If your customer demands 'instant gratification' when an order is placed, then your 'last-mile' needs to be closer to your customer. Just because everyone is moving to Vietnam or Thailand or Mexico or USA, does not mean it is the right strategy for your business too. There is a methodology for network design that determines the right footprint for your business. The analysis and conclusions are based on the trade-offs between alternative scenarios and how it supports your product and go-to market strategy.
'What-if' Analysis Capability
You cannot control the macro-economic impacts of a disruption. But you can certainly run what-if scenarios and make data-driven decisions to mitigate the impacts on your business during such crisis. Time and again we have seen 'what-if' questions come up when making decisions and most times the answer is a guess or an opinion or a bias or a mix of all these. Secondly, if you want a data-driven answer then it takes days or weeks to get that. 'What-if' analysis capability enabled by software provides you a data-driven, rapid, decision support framework. And augmenting human intelligence with software technology gives you the competitive advantage at 10X speed in your industry.
Robotic Process Automation
We all perform certain repetitive tasks at work (whether you are at your office or working from home). Bi-Weekly or monthly planning cycles have a significant amount of tasks that are repetitive and non-value add. For example, downloading data from transactional systems, copy-paste parts of that data into the master planning spreadsheet model, running pivots, creating charts in spreadsheet to analyze results, uploading the results back to ERP to execute. Map your planning process to identify the value-add vs. non-value-add activities. Automate the non-value add activities and make your planning team efficient. Let the machine do the grunt work while the team focuses on the outputs, running what-if scenarios and analyzing potential opportunities to improve business performance.
Before we replace a human with a robot/AI, we need to talk the robot out of the human
Benefits of Robotic Process Automation
Digital Supply Chain Transformation
Digitalization of supply chain processes is using digital technology to improve existing operating processes and business models.
Digitization is driving exponential increase in data size and global supply chains need faster and smarter answers. Every action and reaction in supply chain operations generates data. As companies digitize this data it is imperative to implement tools to extract, analyze and collaborate this data to unlock the potential across your supply chain. Supply chain planning and execution with spreadsheets is simply unsustainable in this era. In addition to the operational benefits and improvements shown in the figure above, digitalization has following benefits:
Eliminates data waste.
Eliminates data latency.
Unifies data across the supply chain (horizontally and vertically).
Provides granularity of decision data.
Provides supply chain visibility.
Enables application of optimization algorithms and ML to supply chain data sets.
Digitalization of your supply chain planning and execution is not only important but imperative in post-covid era. You cannot put this in the 'for later' list anymore.