First, the global pandemic is not
over. Its impact is still being felt in
economies, industries, and markets around the world. How businesses come out of this will differ.
From a restart to a rebuild.
CoViD has validated the criticality
and strategic importance of supply chain management (SCM). That is a given. It has shown to be the operations backbone of
retailers, etailers, and manufacturers.
Supply chains and their transportation and logistics components are
essential services.
It has been nearly impossible to
come through the coronavirus without a changed supply chain management. And it raises a question. Has CoViD shown that supply chains were in
operating ruts—pre-coronavirus? Or,
another way, has it taken a global pandemic to make needed changes in SCM?
So, what now? It is time to build on what was done—the good
and the flaws that were exposed. This is
an action plan that supply chain management people can use to put in place for
the new supply chain management.
What I am presenting may not apply
to supply chains across industries, market sectors, and the world. Each business has been affected differently
by CoViD from none/little to extensive.
But there are changes and a new supply chain. While every point here may not be relevant to
every business, it does present thoughts to consider for the new supply chain
management and new economic/business reality that is being formed.
Some of the changes that are
happening are overdue, call it pre-CoViD.
An example is firms that are doing SKU rationalization which is a subset
item for inventory and warehousing.
Others may have been held back.
But that was then, and this is now.
Several of the items contain
talking points that appear in more thane one action item. That reflects the nature of supply chain
management.
STRATEGY. This is your starting point. A cohesive plan for where you are going and
how you will get there—your new supply chain management. This is what will be done and how it will be
implemented/executed. The what, how, and
why. The steps. It should include collaboration and buy-in
from other areas in the company.
The strategy should be about more
than fixing problems that the coronavirus exposed. This is your clean sheet of paper. It should reflect how your end-to-end supply chain should be
designed and managed for viability.
Here are two approaches for your
assessment:
1)
Upstream/inbound and
downstream/outbound/fulfillment. These
are the two sections of the end-to-end supply chains. These are the parts that had to deal with
CoViD. Think about that and all you have
been dealing with.
And/or
2)
Inside the 4 walls and outside the 4 walls (This
is a variation of warehousing and transportation.) Much of your supply chain is outside the four
walls of distribution centers, factories, and stores. Four-wall myopia limits seeing the end-to-end
supply chain and its complexity. In
turn, this view can impact how well your ERP system functions. And, it leaves a hole in lean efforts. Do not miss the big picture where so much
goes on.
These are different from how supply
chains have been traditionally structured, and that presents opportunities for
new ideas. This includes the usual
operation as to stop-go/node-link. This
can help with streamlining how products move and sit.
STRUCTURE. There are three parts to the foundation and
formation of your supply chain.
1)
Process.
This should be streamlined. Gaps,
redundancies, and unnecessary actions corrected. This is for both operations and
planning.
2)
Technology.
This will be a big issue for your supply chain. More will be in the Technology section.
1)
Organization.
Some of this is reflected in your assessment for your strategy. Think of a shift from the usual
transportation and warehousing to something more relevant to your new supply
chain—such as upstream and downstream.
Procurement and
the upstream with its transportation focus should be brought together into one
operation. Having them in two different groups in the company misses
performance improvements, lessening risk, and improving resilience.
Technology should be
embedded in the organization. Tech is important to what is needed. So they
should be part of the supply chain management organization. They should also
interact with the corporate technology organization.
Think about segmenting the activity
by common supply chain requirements.
This is different than segmenting by customers—some kind of 80/20
view. The attention will also reduce
risk and increase resilience by designing and placing resources where most
needed, important, and with clear roles.
SUPPLY CHAIN COMPLEXITY.
What has happened is more than a bullwhip effect. The supply shocks and then demand shocks
showed the complexity of supply chain management. It was always there but hidden with buzzwords
of agile, linear, and others. Now the complexity, nonlinearity, and supply
chains within supply chains were exposed.
This is especially so with the upstream section which often gets less
attention.
Now you have recognized it. What do you do about it? Your answer is shown in the Structure,
Resilience and Risk, and other parts of the action plan.
RESILIENCE AND RISK. A hot pandemic buzzword for supply chains is
resilience—the ability to recover. Now against the background of a global
pandemic, some of this is a bit of stretch. But given what supply chain
management has done and has struggled with means they are critical to both
operations and the recovery effort.
Here are two areas
for you to consider for your resilience study.
The first is transportation and logistics activities, both those inside
your company and those outside of it. They
moved your
products. Imagine what may have
happened if they had not performed as they did?
They are fundamental to your company.
They deserve an Oprah shout out.
The second is technology. Think about drones and warehouse
robotics—think contactless. Tech is not affected in the same manner as people
by a pandemic.
Risk has always been a factor in
supply chain management. Insurance has
viewed it in terms of assets. But the
coronavirus has shown it is much more.
Transportation and logistics parties and infrastructure should be
included.
Think of the chain of custody. That is something that was missing before in
risk assessment, identification, and mitigation. All the parties involved with an order, with
a shipment. Those you know of and
see. And those you do not.
Look at upstream and all the
parties. Your suppliers. Your suppliers' suppliers. And so on. Think of how these suppliers may
provide across product categories, make assemblies and components that go into
multiple products. Supply chains within supply chains. Nonlinearity.
Map your supply chain. This is
important. All the participants and
stakeholders. Look at the
complexity. See possible supply chain
weak spots—risk. And some have higher risk as the pandemic showed.
A question for you. How does any outsourcing you have done of
your transportation or logistics play against the pandemic themes of increased
resilience and reduced risk? This is not
looking at why you outsourced, instead, this is about the R&R tests and
whether you should bring any of it in-house. Transportation. Warehousing. Procurement. 3PL.
Think about it.
TECHNOLOGY. Even before coronavirus, technology for SCM
was getting attention. Now it is getting
more attention—some for use with resilience.
Against a list of all the
technologies, some you may want to consider are:
·
Data and analytics. There is an incredible amount of data in the
end-to-end supply chain that can be analyzed for management, improvements,
savings, and performance. It would leave
your spreadsheets in the dust.
·
Digitization.
This is a way to get needed end-to-end data with the many parties
involved with supply chains. With it,
the supply chain can be streamlined as compared to paper documents. Think of
the purchase order, bill of lading, and using the bill of material in new and
better ways. And those are just starters.
·
Blockchain.
The digital ledger seems to have a way to go to reach the potential that
is mentioned as to visibility and track and trace. Blockchain enthusiasts, right now, have a
simplified, linear view of supply chains.
The present approach misses many parties involved in the movement of orders. This may mean holes in the visibility and
risks by not maintaining the chain of custody.
All this said you should get involved with it and lead your company's
effort.
·
Contactless.
As mentioned, this has to do with technology not catching diseases. Warehouse robotics. Drones. Driverless
trucks. These and others can increase
resilience.
If you do not have the deep pockets
and resources for the kind of technology mentioned here, then focus on your
supply chain process as the way forward.
Review where you get data and all the parties involved with your
operations and planning. See where you
can reduce who all are involved and smooth what is done and how as a way to
improve resilience and mitigate risk.
AND. There will likely be pressure for you to
control and reduce costs as businesses start back up. And even more so, with the recession. There may be fewer transportation and
logistics providers to negotiate with, including those you worked with before
all this happened.
At the same time, you may be dealing with the costs to restart your supply chain and restock inventory. So there may be conflicting challenges for you. Carrying additional inventory is a possible resilience tactic. That also means you may need additional warehouse space
At the same time, you may be dealing with the costs to restart your supply chain and restock inventory. So there may be conflicting challenges for you. Carrying additional inventory is a possible resilience tactic. That also means you may need additional warehouse space
I hope that the new, post-pandemic
supply chain management gets rid of meaningless performance metrics, such as
supply chain costs as a percent of sales or transportation as a percent of
revenue. These are poor metrics that have nothing to do with SCM performance. Use the data and analytics for performance
measures that are relevant to the C-suite—not ones that are internal to supply
chain management.
If your company is involved in e-commerce and looks to hold the sales
increase it picked up during the coronavirus from online or is looking to step
up e-commerce efforts, this should get
top attention. The reality of online sales has been proven
numerous times and there may be required as an effect of the pandemic. You should understand the differences between
the end-to-end supply chain for e-commerce versus your traditional
business—including perfect order delivery speed.
There are discussions on moving
production onshore. That is a matter of
the tradeoff in product costs vs higher resilience. You may be asked to develop a way to transfer
your sourcing from a certain country to another or to reshore/onshore/nearshore
it. This is not an overnight
project. You should also consider a
transition plan between where you are now and where you want to be.
CONCLUSION. There will be a
new, post-pandemic supply chain management. It will recognize resilience and risk. Your challenge is to develop the action plan
and strategy to lead your company with this new supply chain and the new
reality it will be working in.
You should have similar exchanges with your
end-to-end supply chain participants. Improving your resilience and reducing
risk is not enough. It is not a
standalone endeavor. You need others, starting
with the ones you have identified as critical, to also do their action plans.
NOTE: The longer the pandemic goes, the
greater the change I see in a new reality.
It will run the gamut Supply Chains, container lines, transportation,
logistics, retail, manufacturing. This is more of a rebuild than reset and is
in concert and conflict with less risk and more resilience.
For more on post-coronavirus supply
chain management, please go to my blogs at:
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