The coronavirus crisis will be a tipping point for supply chain transformation. Now is the time for organizations to look to their supply chain as an enabler of growth. The supply chain has increasingly become a critical function for companies to realize their business aspirations and is a competitive weapon in the modern, digital economy, writes Vibhore Khandelwal, Manager – SCM, Hafele India Pvt. Ltd.
"Survival of the fittest" is a phrase that originated from Darwinian evolutionary theory as a way of describing the mechanism of natural selection really fits appropriate in this pandemic state. Every individual, community, industries, enterprises, nations are striving for the well being and economic survival. The question is either you are going ‘BACK TO NORMAL’ or adapt to ‘THE NEW NORMAL’. Coronavirus pandemic has thrown the global economy into flux. And with that, has triggered a rapid shift in enterprise goals and priorities. Amid this volatility, how should procurement and supply chain teams organize for the rest of 2020 — and beyond? What should you be doing now to thrive in the new normal?
The crisis originated as a supply and demand challenge for the organizations but has evolved to become a business-critical revenue challenge. It has become evident that transparency, agility and end-to-end supply chains are no longer buzzwords but elements that are quintessential for business survival. The focus is shifting from ‘COST’ to ‘RESPONSIVENESS’. The priority is to fulfill the customer requirement. There should be fair treatment given to the customer demand arising in this VUCA world. COVID’19 followed by cyclone ‘AMPHAN’ brings in more disruption. This again brings the wheels to halt impacting the supply chain to great extent. ‘Supply Chain Think Tanks’ across organizations are putting their biological intellect to overcome and recover from these situations and preparing to stand tall and firm in such unprecedented times.
‘Aatm Nirbhar Supply Chain’ is sought to be the futuristic supply chain model - The concept of ‘Self-Reliant’. This is the high time when not only an Individual, the Nation but even Supply Chains have to be ‘Self Reliant’ across industries. Following are few challenges that supply chain are facing and can be curbed out by institutionalizing and designing ‘Aatm Nirbhar Supply Chain’ –
Huge disruptions on the demand side – Forecasting Issues
Longer Sourcing & Manufacturing Lead Times – Supply Planning
Imports (Cross Border Regulations & Compliance)
Supply Chain Network - Distribution & Logistical Issues
Lack of Skilled Workforce – Labor Issues
Shorter Product Life (Product Lifecycle)
Data Integrity & Consistency Issues
Sustainable supply chain - Market Competition
The coronavirus pandemic has created immediate and long-lasting changes in consumer demand across all product categories, generating disruption. Customer empathy is one of several strategies that can be used by marketers during uncertain times.
The biggest challenge today is the uncertainty factor and so it’s very difficult to forecast, however, the silver lining is with advanced analytics it is possible to simulate scenarios and companies can use their wisdom and be prepared to act in case of any eventuality to some extent.
The degree of impact would definitely vary with the industry and hence the time to recover, however, I firmly believe that the recovery will neither be V-shaped nor U-shaped, rather S-shaped which means recovery will have its ups and downs.
To address and combat above ten supply chain challenges, ‘Aatm Nirbhar Model’ comes with the 5 key guiding principles –'
Go Digital (Decide on Transformation Path – Process Mining, Automation etc)
Stand Straight & Tall (Sustainable Environment & Ecosystem)
Be Responsive & Flexible (Multi Model Approach – Omni channel Model)
Upon realizing that we would be staying at home for several weeks, human instinct kicked in. The demand for vital commodities such as milk, eggs, bread, hand sanitizer, and — of all things increased and the demand for discretionary and luxury items dropped drastically. This completely changed the way that consumers think and act. We are thinking less about luxury items and all about necessities, which has caused volatile demand; less about personalized products and more about personal safety; less about a great shopping experience and more about a great delivery experience to our front door; and less about one-day delivery but more about delivering as promised. Amid COVID, Amazon is market paramount and still ruling with great pace. The only reason is responsiveness ‘ETA promise’ and not false commitment of delivery within 24 or 48 Hours.
The coronavirus crisis will be a tipping point for supply chain transformation. Now is the time for organizations to look to their supply chain as an enabler of growth. The supply chain has increasingly become a critical function for companies to realize their business aspirations and is a competitive weapon in the modern, digital economy. Advanced supply chain capabilities can support more efficient and effective current business approaches as well as new business models that translate directly to business performance that is tangible and measurable.
Immediate commands for couple of months -
Working Capital Crunch - Cost control, daily discussions and analysis of every pie of spend (Aggressive spend analysis)
CXO’s Involvement in Daily Transactions - Sensitize current scenario on day to day basis
Adding more dimensions to existing supply chain model (3Rs – Recover, Responsiveness, Relationship)
Supply Chain Canvassing - Continuous Improvement
Communicating with Suppliers and Customers on regular basis as strategic partners
Enhance in-bound material visibility: Keeping the close eye on incoming material and border movements in case of imports.
Medium to Long Term Commands -
Evaluate organizational maturity in handling major supply chain disruptions
Establishing transparency across value chain
Localized production (Make/Buy)
Customer Centric Supply Chain (Pull Model : Other Predictive & Cognitive Models)
Invest in digital supply chain and visibility tools.
Understand and activate alternate sources of supply by fast-tracking qualifications
Omni Channel strategy will be the new normal
Traditionally, corporate executives consider the cost, quality and delivery as their key metrics when developing supply value chains strategies. But as the recent unprecedented crisis has shown, major global events caused by pandemics like COVID-19, as well as natural disasters, climate change and geopolitical tensions, can create significant disruption to the reliable supply of parts or products.
Supply value chains cannot be established overnight. It takes time and effort to qualify potential suppliers in areas of manufacturing quality, capacity, delivery, cost and their ability to respond to engineering or demand changes. Thus, supply value chains are designed for longer-term needs. Once they are established, it can be difficult to change them quickly to adapt to unpredictable disruptions. The COVID-19 pandemic has reminded corporate decision-makers that there is a need to develop new business strategies in their future supply chain designs. The KPIs to be considered for future supply value chain designs will likely contain both traditional metrics such as cost, quality and delivery, and new performance measures (3Rs) including resilience, responsiveness, and re-configurability.
Moving forward, there will be an increased need for infrastructures and technical means to create the transparency within global supply chains. There must also be a call for the development of predictive models for proactive scheduling and dynamic planning of supply demands with the consideration of uncertainties and risk factors. These predictive models will help corporate decision-makers do what-if analysis of various scenarios.
With the pandemic disrupting supply chains, industry professionals have an opportunity to create innovative solutions and rewrite the future supply chain landscape. All organizations, in all industries, in all parts of the world, need to step up their confidence and competence in their supply chain activities.