AS THE PANDEMIC CONTINUES--RISK, RESILIENCE, AND MORE

The longer the pandemic goes, the greater the change I see in a new reality & will run the gamut Supply Chains, container lines, transportation, logistics, retail, manufacturing. This is more of a rebuild than reset & in concert & conflict with less risk & more resilience.

ACTION PLAN FOR POST-PANDEMIC SUPPLY CHAIN MANAGEMENT

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

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:

http://ltdmanagement.blogspot.com/2020/04/post-coronavirus-pandemic-supply-chain.html

http://ltdmanagement.blogspot.com/2020/05/wake-up-call-retailers-3pls.html

http://ltdmanagement.blogspot.com/2020/05/the-nonlinear-supply-chain-in-linear.html

FUTURE OF SUPPLY CHAIN MANAGEMENT: POST-PANDEMIC

CoViD has validated the criticality of supply chain management for both manufacturers and retailers. Through the pandemic, SCM has been the operations backbone of companies. While you deal with the day-to-day of the pandemic, you should also be thinking of what your supply chain should be like when the coronavirus is contained and what it should recognize, including greater resilience and reduced risk. And--chain of custody, technology--analytics, digitization, blockchain.
https://www.youtube.com/watch?v=-WQ8PVkKo90&t=4s

AMAZON SAME DAY DELIVERY VS FOOD DELIVERY. ON DEMAND

Amazon vs Grubhub, DoorDash, and others. On Demand. Some talk about Amazon and food delivery as to being similar.  And while I am at it, what does this mean to UPS, FedEx, and USPS?

Amazon does not compare to food delivery. First, and most important, this is about customer expectations--not what a retailer or restaurant wants to do. Amazon already has volume/size as to orders and as to size of warehouses. It DOMINATES e-commerce. 

The shift has been to same day. Using technology to increase order throughput makes that possible as its model expands from two day, to one day, to same day. 

And remember, when they first said two day, they were questioned and mocked. But they did--using a new supply chain management. By doing it, they turned retail on its head and created a new business--e-commerce. No longer an ignored minor sales niche. 

Okay--that's Amazon. Grubhub and others are an on-demand model where there is no volume. A customer. A restaurant. An order. And that is the problem with gaining profitability. The Onesies. 

Amazon' large activity vs Grubhub onesies. An interesting thing to watch is how BigA handles the delivery shift--its own delivery service plus UPS & USPS to same day. How to blend it all--including Deliveroo? Or transition away from UPS/USPS for same day and eventually for most of it. Just some thoughts. 

Pandemic Supply Chain Lesson 3: THE NONLINEAR SUPPLY CHAIN IN A LINEAR BUSINESS WORLD

Pandemic Supply Chain Lesson 3: THE NONLINEAR SUPPLY CHAIN IN A LINEAR BUSINESS WORLD

--Hint: Supply Chains Are Complex—

Coronavirus has opened the eyes of many manufacturers and retailers with regards to supply chain management (SCM):

·       Supply chains are nonlinear

·       Supply chains are complex

·       There are supply chains within supply chains

·       The upstream supply chain is large

CoViD has challenged Straight-Line Thinking Syndrome (SLTS).  Think of that as a modern-day Flat Earth Society.

For some unknown reason, supply chains are viewed as linear.  A business urban legend. There is a self-imposed alignment.  Like railroad tracks. Suppliers to production to customers. Or production to warehouses to stores.  Like a double play. Tinkers to Evers to Chance.  Sometimes there were simple assumptions too, such as constant production and/or demand.  These and similar ideas have held back the development of the upstream (sometimes called inbound) supply chain.

Upstream is where suppliers are and where the supply of supply chains begins.  To add to the problem, the upstream was bifurcated as to transportation and procurement.  (For too many, supply chain management is viewed and defined as and by its transportation/logistics elements and not by upstream/downstream or other relevant designations.) The two parts are also managed in separate groups in a company.  And both are measured primarily by costs.  

  

For some, this paper is an introduction to the upstream supply chain.  They think of SCM as downstream, fulfillment, warehouses, factories, store shelves full, and inventory--as if it all somehow magically happens.  This is a myopic view of supply chain management and an extension of linear bias. 

Another example of linear (SLTS) is blockchain and its application to supply chains.  A push is blockchain brings supply chain visibility.  In a way, this reduces the digital ledger to a form of track and trace.  But the same type of straight-line images is used, such as supplier to retailer to store.  The complexity of SCM is not understood.

Think of manufacturing bills of material (BOM) and the many parts, components, and assemblies that go into a product.  All the suppliers that make them.  All the countries they are located in.  Expand this to the many products that the company makes.

  

Purchase orders to suppliers are not the start and end of this either.  They stimulate suppliers to send purchase orders to their suppliers.  And so on it may go.  The complexity of supply chain management.  Supply chains within supply chains.  The upstream supply chain. And much of it unseen, especially with linear thinking.  All this is what should be recognized with a shift to onshoring/reshoring/nearshoring.

The complexity starts to show.  Now step back and see all these as to countries of origin. suppliers.  Supply chains within supply chains.  This multi-step view also applies to the finished goods that retailers order/buy.

What you are starting to see is not something linear. It is not a 3-step action, the double play. It looks more like a decision tree.  And that image does not show how suppliers and parts apply across products.

These processes involve time.  Now the intricacy with the addition of time comes into production, sales planning, and sales and operations planning (S&OP).  These unseen activities are challenges to these programs, including ERP systems.  

Think of the Mississippi River.  It is long, runs from Minnesota down through Louisiana, and ends in the Gulf of Mexico—the Mighty Mississippi.  But the river is not a single, linear entity.   It is fed by 7,000 streams, water basins, and smaller rivers.  These various bodies of water that flow runs through 31 states and 2 Canadian provinces.  All into one river. The Mississippi is how supply chains are—large, complex, non-linear, supply chains within supply chains.   

    

This is just the start. Now, look at an international shipment.  Factor in all the parties that are involved with one.  Depending on the origin and destination, there may be 15 participants, or more, involved with an international shipment.  The simple, few parties involved linearity is lost. And the gaps in the blockchain examples begin to appear.

Linearity misses the complexity and supply chains within supply chains.  It is sort of a business version of "pay no attention to that man behind the curtain".  Those that do not see the non-linearity also have difficulty understanding the scope and totality of supply chain management.  

And the convolution is not done. Now have two different groups involved here—supply chain management and procurement. (I will exclude situations where engineers are involved with ordering/buying.)  A cohesive upstream approach and opportunity are lost for the largest part of the supply chain.

It starts with nonlinearity which leads to the upstream supply chain which leads to supply chains within supply chains which confirms complexity.  The result is how strategic supply chain management is—end-to-end.  

Coronavirus validated the risk and criticality of supply chain management, especially the upstream segment.  Recognizing nonlinearity is important to properly identify supply chain risks and weak spots in resilience.  The post-pandemic need is to correct this and to build resilience and reduce risk.

Speaking of the pandemic, some discuss CoViD as a bullwhip effect on supply chains.  What it brought was greater.  Supply shocks. Demand shocks. Chaos up and down the supply chain—end to end.  Maybe it was something Dante missed—the tenth circle of hell.

In recognition of what is happening, here are some thoughts.  Supply chain management's crucial importance should be obvious to retailing because it is the operations arm of retail.  For e-commerce, end-to-end SCM drove the success of Amazon's order delivery velocity.  That speed created a new market and turned retail on its head.  The pandemic has validated the criticality of supply chain management in manufacturing and retail. 

There will be a post-pandemic supply chain management emerging, and it should organize as to downstream and upstream. The upstream with the blended activities of procurement and transportation/logistics should have responsibility for managing and positioning resources.  Manage by segments as to commonalities.  By products/parts. By supplier.  By country.  By risk,  By transport method.  Or by other meaningful criteria and subsets.

Supply chain management should be recognized and praised by Boards and C-suites, including elevating SCM to the C-level and the CEO position.  No activity is as complex, crosses so many parts of the company, and has the global reach--both upstream and downstream.

Bottom line--supply chain management is disruptive innovation. It is strategic, and when weaponized, defines businesses. Treat it that way.  

Email me at: tomc@ltdmgmt.com

Check my profile at: https://www.linkedin.com/in/tomcraig1/

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Pandemic Supply Chain Lesson 2: WAKE UP CALL: RETAILERS, 3PLs, MANUFACTURERS, TRANSPORTATION AND LOGISTICS PROVIDERS

Pandemic Supply Chain Lesson 2: RISK AND RESILIENCE WAKE UP CALL: RETAILERS, 3PLs, MANUFACTURERS, TRANSPORTATION AND LOGISTICS PROVIDERS

--A High-Risk and Resilience Situation for All--

First, the pandemic is creating the need for transformation.  That especially applies to supply chain management for manufacturers ad retailers.  It also applies to logistics, transportation, and 3PLs. Takeaways for the change include:

·       Reduce risk

·       Build resilience

·       Develop agility

·       Streamline

Risk is listed first. The others tie to and are derivatives of risk mitigation.  This paper reflects lessons learned and adaptation.

Did you notice, even before the pandemic, there were signs that changes were needed and were coming to transportation, logistics, and 3PLs?  Much of this is based on e-commerce.  And with the coronavirus isolation, online sales have surged which escalates transformation needs.

The same Amazon that turned e-commerce from a minor, retail annoyance into a dynamic new way to sell is the leader here.  Order delivery is driven by a new supply chain management (SCM) that is strategic and weaponized—and more.  This supply chain management is disruptive innovation.

Amazon began to bring outside transportation and logistics services in-house—reverse outsourcing/insourcing.  They made these changes in their end-to-end supply chain and its logistics and transportation. Lease airplane fleet to move products.  Be their delivery service. 

Business Insider had two articles on April 20. One, by Eugene Kim, "Bank of America estimates Amazon's own delivery service could be worth up to $230 billion by 2025. This charge shows a growing warehouse footprint that's already as big as 7,300 football fields."  The other, by Rachel 

Premack, "Bank of America says Amazon is the No. 4 largest delivery company in the US---here's how it's network compares to UPS, USPS, and FedEx.

Amazon, once mocked for what it would take to build its own logistics network, is now generating concern.  To its e-commerce competitors, the power of such operations, cost savings, and customer convenience, the latter when compared to click and collect, cannot be ignored.

By removing middlemen—disintermediation—it can increase the speed of its end-to-end supply chain and improve its order delivery velocity.  This disintermediation streamlines supply chains. It also builds agility with fewer participants.  Plus, it opens itself up to greater integrated technology by having fewer players for visibility, digitalization, and blockchain.  And these improve its control and performance.

For transportation, logistics, and 3PLs, what Amazon is doing is a threat to who they are.  And the potential it creates for other companies to adapt parts of Amazon's approach, the volume/business loss that would mean, and fear that Amazon could offer its services to other shippers. 

These service providers appear to be standing firm on their offerings and capabilities despite what is happening.  That ups their risk.

Coronavirus and its impact on supply chains have redefined the global risks landscape. It has strained and frayed supply chains, logistics, and transportation. Upstream and downstream. The efforts by supply chain management organizations and transportation and logistics personnel have been outstanding. 

CoViD-19 has hit retail and many manufacturers very hard.  On the other hand, e-commerce, with social distancing and other factors, has had a surge. It has overwhelmed large and small e-tailers and their abilities to deliver orders.

UPS and FedEx talk about the loss of B2B business and the increase in B2C during the coronavirus. There are more stops per truck and that means higher costs. Like everyone, they were not prepared for something as extreme as COVID and what it has done. 

UPS is going to target rates to customers.  Depending on the size and impact of these rates, it may force manufacturers and retailers to find ways to offset the Last Mile costs.

The takeaway is that the signs that were there are more pronounced now.  Change is needed. 

For those not bringing transportation and logistics in-house, there is a need for a new kind of service.  One that is about customer supply chains, not logistics.  The pandemic has pointed the way to the need for resilience.

This new service—call it 3PSCM or SCMaaS-- addresses what has been missing— focus on the supply chain and integration into supply chains for better performance and visibility—not separate transportation or logistics services.  3PSCM is a needed evolution from 3PL. SCMaaS is what 4PL should have been.

A fixation on transportation and logistics—and that is related to the over-emphasis on their costs—has caused misdirection.  This is important.  It has taken attention away from managing total product flows.  Instead, manufacturers and retailers have a stop/start or node/link approach that is central to their supply chain management.

The new supply chain service business model embeds and facilitates technology along the supply chain.  And it brings a greater focus on supply chains that helps build supply chain resilience. 

Supply chains have been tested under fire.  Their complexity has been shown, including the non-linearity and supply chains within supply chains.  Against this reality, building a resilient supply chain takes work and is a factor of many actions.  3PSCM/SCMaaS is one of those needed changes.

Resilience comes by letting go of defining supply chain management by costs instead of performance and by reducing the players/participants in the supply chain to build stronger ties and collaboration.  In turn, it mitigates supply chain risk and provides better vision and control—end-to-end.

When coronavirus reaches an end, supply chains must be reinvigorated, restarted, or even rebuilt.  Customers will come back wanting their order delivery speed. And a new way—a resilient way—will be needed.  And that new service demand and providers will spread across industries, markets, and the world.

Doing nothing brings risk. Doing it wrong brings risk.  To retailers.  To manufacturers.  To transportation providers.  To logistics companies.  To 3PLs.  The risk of losing business. The risk of becoming irrelevant.  This may be a matter of seismic risk and resilience.

The question is—what will you do?

Email me at: tomc@ltdmgmt.com

Check my profile at: https://www.linkedin.com/in/tomcraig1/

Pandemic Supply Chain Lesson 1: POST-CORONAVIRUS PANDEMIC SUPPLY CHAIN MANAGEMENT

Pandemic Supply Chain Lesson 1: POST-CORONAVIRUS PANDEMIC SUPPLY CHAIN MANAGEMENT

--Restart/Rebuild and More--

Content.

·       Reality and More Than Bullwhip

·       Forced Change and a Plan

·       Restart/Reset/Rebuild

·       Reshoring/Nearshoring/Onshoring

·       Industries/Market Sectors

·       E-commerce

·       Lessons Learned/Takeaways

·       Upstream Supply Chain

·       Inventory

·       Risk

·       Cost Pressure

·       Segmentation

·       Conclusion

---------------------------------------------------------------------------------------------------

To start, supply chain management is leading retailers and manufacturers through this crisis.  Businesses and supply chains are changing and may be permanently changed.  Many of these changes will remain after the pandemic ends.  There will be no discussion of specific companies.  This is about bigger issues.

Use your domain expertise and experience to lead.  This is not a time for 40,000-feet terms and comments.  It is about practical supply chain management issues.  It is about adapting to the adjustments that CoViD19 makes on companies.  And, for supply chain management executives, it is about leading.  The dual challenge is dealing with the daily crush of what is happening and developing a supply chain strategy for after coronavirus with attention to end-to-end design and operations.

  

The pandemic has placed incredible stress on supply chains—end-to-end-- and their underlying, transportation/logistics service providers. It has established the importance of supply chain management (SCM) as it carries the operational responsibilities of company after company.  And more, stepping up above and beyond the call. 

Reality and More Than Bullwhip.

  

Much of the pressure is on the upstream supply chain. There was supply shock as Asia suppliers and manufacturers shut down.  Then there was demand shock as companies in North America, Europe, and around the world closed to deal with and limit CoViD19 spread.  And caught in the middle were all these supply chains and transport/logistics providers. Warehouses. Truckers. Ocean carriers. And more.  All this goes beyond the bullwhip effect both at the global magnitude of supply shocks and demand shocks and at the company level.

Transportation/logistics firms are struggling. Ocean carriers are dealing with reduced volumes, export shipments from Asia and importers not knowing what to do with containers with their businesses at a reduced activity or closed. Ships have been laid up.  Sailings have been blanked.  Ports and warehouses are congested.  There is even a suspension of transit in ocean transportation because of port congestion.

Along the end-to-end supply chain and its end-to-end logistics/transport are companies dealing with coronavirus in their own companies and with significantly reduced volumes and revenues to maintain operations.  This situation goes beyond challenging, as it does for much of global business.

Post-coronavirus discussions will include who had deep pockets to weather this and Darwinism—survival of the fittest.  And this will include Supply Chain Darwinism.  

As the battle continues, supply chain management executives must also be thinking of what their supply chains will look at when it is all over.  The strategy, design, and changes—post coronavirus.  And the lessons learned.  A question is how much of the lessons will be retained and implemented? And how much ignored and forgotten?  This is also a chance for businesses that have been laggards in revising their supply chain management to upgrade.

The supply chain management that emerges should be developed by SCM people.  This is their domain, their expertise, and their efforts that are carrying retailers and manufacturers through CoViD-19.  

There is the idea of supply chain resilience (and supply chain resilience may become the new buzz term). The question is at what scale considering another global crisis. This concept/buzzword can also distract from the work required with restarting, even rebuilding, manufacturing and retailing.  Again, this is about the end-to-end/total supply chain and not parts, such as fulfillment. The bigger issues. Bigger picture.

Forced Change and a Plan.

What companies are looking at is change—more exactly, forced change.  Make your plan for coming back post-coronavirus.  Do not wait to be asked for one.  Be out front. 

Change is difficult for most companies.  It must be done well with thought, planning, and solid execution.  And the change includes people adapting to new ways—a new reality.  And the adjustment challenge is compounded because it is mandatory for many.

Build from the elevated position that supply chain management achieved during the pandemic.  There are two factors to the plan for the post-coronavirus supply chain—events outside the company and supply chain management and those within SCM.  Not surprisingly, there is an overlap between the two and the points to consider within each.

First, topics outside of supply chain management that can influence the post-coronavirus strategy, operation and the company:

Restart/Reset/Rebuild.

Few manufacturers and retailers that operated during CoViD will come through relatively unscathed for their end-to-end supply chains and their transportation/logistics firms. That means how do we get things going?  Post-coronavirus business and supply chains may likely deal with a three-prong economic hit of recession and altered and contracted spending by consumers and businesses. The question is how long these will last?

One thing seems to be certain. Reset/restart supply chains for most firms will not be like flicking on a light switch.  It will be more than turning on machines and opening store doors.  For many, there will be changes. It will not be just picking up where everything was before the worldwide pandemic.

For starters, who will still be in business and how strong will they be? The pandemic is causing financial risk.  This includes manufacturers, retailers, suppliers, and transportation carriers/logistics providers. Plus, there is also the matter of when and how consumers and businesses will revise their isolation practices.

Importers who were closed will have to find where their containers are located while they were shut done—and if the carriers or forwarders who handled them are still operating.  Ports must be cleared of container congestion.  Warehouses at ports and elsewhere are filled with products that are sitting.  These must be removed as inventories are restocked.  And, hopefully, there is the needed paperwork to clear customs.

Staying with transportation/logistics, these firms must be reactivated to get goods moving.   Ocean containers must be repositioned.  There is suspension of transit/storage in transit with containers sitting at transshipment ports.  Ships are laid up and how they are recrewed and the rotation for which vessel starts where and when. Plus there are possible demurrage and other costs and insurance liabilities. How it may affect all this is the litigious mess ahead among carriers, forwarders, and importers.  Restart/reset gets more complex.

There is also discussion that social distancing, either formally or informally, will continue in 2021 and maybe 2022. What will that do to retail, grocery, CPG/FMCG manufacturers and their supply chains as to restart/reset/rebuild?

Once the various total supply chain statuses are validated or revised/updated, then restock/replenishment can start.  Depending upon what is still operating and how well, this may be more of a rebuild than a restart.  Retailers and others in countries hard hit by the coronavirus may face more of a rebuild.

Manufacturers and retailers may need to develop new suppliers and existing suppliers may need to find new suppliers too.  Add in transport and logistics providers, all modes and methods, new providers may need to be established.

That will add delays for products to be made and shipped, including the suppliers of your suppliers and their suppliers.  The production and transit times will add to the delay.  Not every company will be able to expedite the movements by flying in inventories.

Against these are companies that are still working.  Their supply chains, while limited, are still functioning.  They could have an advantage when business resumes.

Reshoring/Nearshoring/Onshoring.

This topic sets a foundation for other issues presented below.  Reshoring/nearshoring/onshoring, pulling back from globalization, is getting attention at this time.  Offshoring took decades and was based on the demand and push for lower product costs. 

There are two points here.  First, the role of the upstream supply chain and top importers and products imported provide context.  The information below is for the United States.  Research can be done for other countries to provide a basis for discussion. 

Data is presented for importers and for products imported into the US to set the scope of the endeavor.  These numbers provide an order of magnitude--an idea of the size of moving productions back to the US.  Research for other countries would set the basis for them.

The US imports over 20 million containers (measured at TEUs—20-foot size container or equivalent) a year.  Here are the top 10 importers in 2018 and the number of containers they brought in.  The number is TEUs.  The data is from PIERS, a sister company of JOC.com: 

IMPORTERS of Containerized Goods

1)     Walmart.  940,410

2)     Target.  631,621

3)     Home Depot.  417,100

4)     Lowe's. 307,625

5)     Dole Food.  235.571

6)     Ashley Furniture.  200,000

7)     Samsung America.  190,144

8)     Family Dollar Stores/Dollar Tree.  180,985

9)     LG Group.  173,720

10)  Philips Electronics NA.  152,903

Drawing on a February 8, 2020, article by Daniel Workman, "United States Top 10 Imports", the US imported $2.568 trillion worth of goods in 2019.  The top 10 products imported for 2019 are:

PRODUCTS IMPORTED

1)     Machinery including computers. 14.8% of the total.

2)     Electrical machinery, equipment.  13.7%

3)     Vehicles.  12.1%

4)     Mineral fuels including oil: 8,2%

5)     Pharmaceuticals.  5%

6)     Optical, technical, medical apparatus.  3.8%

7)     Furniture, bedding, lighting, signs, prefab buildings.  2.6%

8)     Plastics, plastic articles.  2.4%

9)     Gems, precious metals: 2.3%

10) Organic chemicals.  2.1%

Note, some of the products above do not move in containers and are not in the TEU data.  Also, there is the issue of supply chains within supply chains upstream.  This is often not a simple one-step manufacturing activity.

The different data show the diversity of industries, products, and supply chains. These also mean many versions of post-coronavirus supply chain management.

Note, a recent article said Bank of America estimates the price of $1 trillion to move export manufacturing for reshoring.  And that price does not recognize and include the upstream supply chain complexity of suppliers' suppliers.

Industries/Market Sectors.

Not every market sector and industry has been affected in the same way by the pandemic.  Some have been highly effected, others moderately, and some little.  So, post-coronavirus supply chain management will differ. 

Retail is a very affected industry.   Their operations are their supply chain management—end to end.   Stores closed or are limiting how many customers can go in. E-commerce, whether delivery or customer pickup, are sales lifelines. 

Merchants who are closed have inbound supply chains that have stopped. Others with essential items, such as grocery and pharmaceuticals, are doing "well".  These two sectors are doing more online sales because of social distancing.  And both depend on supply chain management as their operations.

Recognition of other sectors include:  

·       Complex products and their bills of material with the sourcing of parts, components, and assemblies from multiple countries bring a special footprint. Multiple countries mean multiple supply chains and coordinating the movements across products.

·       Low-price retailers and other businesses may find an advantage after CoViD as countries deal with their recessions.

·       Apparel may be challenged for a Zara type model with production closer to the sales market. This means different SCM, including different materials and styles.

·       Sectors such as luggage, swimwear, formal wear, and bridal clothing have been hard hit. Their needs may range from potential rebuilds to unsold inventories—and how all these ripple up their supply chains.

·       Retailers, e-tailers, and CPG/FMCG may have sales drops with products that consumers stocked up on during the coronavirus and as they draw down on their home inventories.

E-commerce.

E-commerce is a bright spot during this time.  It is a market that is experiencing growth as a result of the coronavirus. Social distancing, stay at home, store closings, and personal safety concerns are factors in its surge.

The sales surge has tested the design and operations of supply chains.  For e-commerce, like retail, supply chain management is the operation.  Depending on the length of self-quarantine, online activities and their supply chains may be put to more pressure.  Also, as with retail, self-quarantine has impacted some products more as to missing out on online sales.

E-commerce during this time has escalated discussions as to retail's future as to bricks vs clicks  These tie to speculation on how much of e-commerce's growth will be retained after coronavirus eases.  Branding and rebranding around digital retailing—which demands a strong end-to-end

supply chain is something only a few had before COVID.  Also, laggards in e-commerce have had problems during a pandemic to upgrade their supply chains as needed for robust online sales.

There was the retail apocalypse and now what may be a retail Armageddon.  Will this cause CPG/FMCG/non-durable consumer goods manufacturers to rethink of being less dependent on retailers and selling their products online/direct to customer?  This will require them to revise their supply chains to do online order delivery and its last mile.

Pre-crisis order delivery velocity has been tempered during this time with the crush of orders and the supplies of products.  If post-coronavirus, the volumes for online hold, then a question is whether order-delivery expectations will return.  If so, what will this mean among the firms selling online?  What product assortments sold well?  Will they still?  How and what products may also start selling strongly?  These questions range from what are called essentials items during this and nonessentials.  The growth may be two-fold—holding on to what products sold well and having the "nonessentials" sell again.

Having products to sell during a crisis versus selling with renewed customer expectation is unknown. If there is a return to the prior ways, then what supply chain management will drive business, as before?  While it stands as "to be determined", the supply chain implications are significant.  Will it mean more warehouse capacity, added technology and robotics, and more delivery capability?

Second, now topics within supply chain management to draw on for the post-coronavirus supply chain management.  They reflect lessons learned about supply chain management and what to do about them:

Lessons Learned/Takeaways.

Supply chain management is more than strategic.  SCM is the hidden strength of many manufacturers and retailers that kept them in business.  Those that still view it in terms of back-office and cost center are either in unique businesses or face futures filled with struggles.

The end-to-end complexity of supply chain management has been validated.  Map and understand your supply chain, its complexity, non-linearity, and supply chains within supply chains. Do upstream and downstream.  Assess and understand it, including risks.  Identify these from what is happening and if and how to mitigate them.

Companies that ignored e-commerce and struggled to pivot and change their supply chains for direct to consumer (DTC) during the crisis.   Many of these had essentials and were used to selling to businesses.  A question is whether they add online to their capabilities and upgrade their supply chains for e-commerce.

Where the greatest pressures were should be important in developing a new structure of process, technology, and organization.  For example, instead of organizing as to logistics activities, do it by upstream and downstream.  Then for things like corporate transportation, supplier, logistics negotiations, put them into a type of matrix management.

The use of track and trace technology for visibility depends on the operating viability of the carrier or forwarder. This is a lesson about survival.  Blockchain is another option—a digital ledger track and trace—with a similar limitation as to supplier, transportation, logistics survival. A supply chain execution technology that takes the higher visibility view, should be substituted.  Such platforms focus on purchase orders the fundamental document of supply chain management, logistics, and business.  That also implies greater control of the upstream and downstream supply chains with increased visibility.

Upstream Supply Chain. 

Much of what has happened is with the upstream supply chain. Its importance has been recognized, which is interesting since the supply of supply chains begins upstream.  This contrasts with the downstream supply chain that traditionally has gotten more attention.  It is larger and more complex that downstream. 

The inbound supply chain performance has often been defined by costs.  The upstream is bifurcated as to finished goods/parts/etc. and transportation/logistics. This can contribute to a gap in managing the total activity and a degree of confusion with the cost pressure.

At the minimum, post-CoViD, the upstream should be elevated.  Its complexity and supply chains within supply should be mapped and assessed.  The bifurcation should stop.

These, and other steps, are lessons learned that should be corrected.  This is not just for supply chain resilience, it is about operational viability and risk mitigation going forward.

Inventory.

Restocking inventory will be one of the first actions after COVID-19 is resolved.  There will be questions about existing suppliers, new suppliers and where to supply from?

But there are other questions too.  A look in distribution centers and warehouses shows products that do not sell/move. These range from parts/assemblies/components to finished goods.  These non-moving/very slow-moving represent wasted working capital that could have been invested in the company and could have generated a better return. 

Slow/non-movers can be seen by the dust on the cartons in the warehouse, by sales reports, and by inventory turns, and by the needed space they take up in distribution centers.  And that use of space then ripples into needs for additional warehousing.  Removing these items and SKU rationalization are starters. 

The speed of inventory movement through the supply chain should be analyzed.  That is a step to improving inventory turns—a very important metric—and having more money.  Stop thinking of inventory, especially excess inventory, as an asset and whether to use LIFO or FIFO. Treat too much inventory as a waste—a waste of working capital and investment opportunities lost.

Sometimes inventory is referred to as A, B, C to designate as to its importance—such as sales or profit margins.  And with seasonality, perhaps use sales by quarter.  Maybe a weighted sales-profit margin index may be good.  The point here is to differentiate and manage inventory by such a designation.  That permits a better focus on inventories.

Managing inventory reflects the total time to plan, receive, and sell.  So time is a factor.  The point is to manage the movement as to A, B, C.  Compress time. Do it for As.  Then Bs.  And then Cs.  That will get faster turns which frees up capital for investment and changes a firm from being inventory rich and cash poor.

Align transportation/logistics with inventory designations.  Prioritize.  Review levels of inventory where there is multi-level warehousing.  Inventor is meant to move through the end-to-end supply chain.  Stopping products does not add value from a customer perspective.

Risk.  

With the pandemic, supply chain risk is getting attention.  For this paper, the risk is not about assets.  That application is left to insurance companies. 

This is about risk identification, assessment, and mitigation along the total supply chain.  It is about the continuity of operations.  Coronavirus, with its global scope, has made this effort both broader and more difficult.  Weaknesses/areas of risk can mean every player and participant in the total supply chain. Every supplier. Every transportation carrier.  Every logistics provider.  And every operation—including every one of yours.  Every link.  Every node.

Start with the understanding and mapping mentioned in Lessons Learned/Takeaways.  That will take you into your supply chains nonlinearity and your supply chains within supply chains.  Much of that is in the upstream supply chain.

  

The effort includes both analytics and expertise, real-world validation, and assessment. Draw on what happened during COVID.  That experience adds a degree of certainty—not just as to the particular companies it applies to but as to the locations on the supply chain. Did the risk stop the supply chain and require rebooting or did it cause a bottleneck that restricted product flows?

A key is knowing there are no absolutes as to risk avoidance in a worldwide crisis. Avoid those who say or infer there is.

Cost Pressure.  

There will likely be pressure to control and reduce costs as businesses start back up.  And even more so, with the anticipated recession.

Lastly, this is a work in progress.  How and how long the coronavirus plays out around the world may affect what is presented here.  This paper will be updated as time and events unfold.  This is my sharing ideas about coronavirus and its impact on post-coronavirus supply chain management.  Good luck.

Tom Craig Consulting    tomc@ltdmgmt.com

Supply Chain Management/Logistics Consultant and Advisor