Time to plan
It’s difficult to be fully prepared for such an extreme event as the Covid-19 outbreak, but some supply chains were better prepared than others. Some businesses went onto the offensive. Many others were forced to adopt defensive positions, simply reacting to the latest shifts in the pandemic. Any organization that could connect the nodes in their supply chain from customers to tier two and three suppliers had an advantage. Equally, any business with advanced scenario planning capabilities was better positioned to quickly model impact and responses.
No company, however, could entirely escape the challenges that came from extreme demand changes and supply disruptions. They may well have had a supply chain that was working well before the pandemic, only to find it was less able to manage when the landscape changed.
As Simon Ellis, Program Vice President, Supply Chain Strategies, IDC, recently stated, commenting on a Kinaxis-sponsored study
IDC conducted in late 2019: “One major finding showed that while companies are confident in the ability of their supply chain to be a source of competitive advantage in the here and now, they are much less confident in its ability to continue to be a differentiator into the future. This was true across almost all the industries surveyed. In the consumer products industry, for example, almost 75 per cent of companies felt that their supply chain was a differentiator today. By 2023, only about 40 per cent of those same companies felt the same way.”
In other words, while they had high levels of confidence that their supply chains were working well in late 2019, that confidence nosedived when it came to projecting what their supply chain management and planning could give them just four years later. You could say it was prescient, given what was lurking around the corner in the shape of the virus – but it does not have to be the case that manufacturing supply chains are immediately thrown off course by such events. Supply chain managers and planners need to be able to expect the unexpected and build resilient supply chains that can flex and adapt to whatever the world throws at them.
This means all companies will ideally need to be conducting post-pandemic boardroom sessions to ready their supply chains for the next major event. If we’ve learned anything it’s not if something like this will happen again but when. Nobody knows what other unexpected ‘black swan’ events may be lying in wait.
There will be much to discuss in the boardroom in the coming months. Below are some of the topics likely to be top of mind for supply chain leaders when it comes to being pandemic-ready:
Global network visibility – It will be important to map your network to understand where there may be risk at any tier in any location, for example, single-sourced supply or highly regulated suppliers. As an outcome of the pandemic, the US Food and Drug Administration (FDA) may, for example, be looking to get supply chain visibility on manufacturing capabilities and supply and inventory into medical devices much like they do now for biopharmaceuticals. This will be so they can report on imminent or forecasted shortages of life-saving or life-sustaining medical devices. Visibility is certainly an overused word, but out of this, there may be a new definition.
Elevated scenario planning – Many businesses claim they can do scenario planning or what-if or digital twins, but the speed of creating, sharing and analyzing multiple scenarios will have to be sub-hour. Things are changing so fast that questions need evaluation as fast as the words come out of someone’s mouth. Planners will take speed over perfection.
Supply reliability. Shortages were the earliest challenges at the start of the pandemic as supply channels started to shut down and demand spiked for critical items. Every supply chain in the world was impacted. For example, aerospace and defense has lots of sole source suppliers, most industries source from China, and India locked down the supply of 26 active pharmaceutical ingredients needed in the life sciences industry. Most supply lanes cross regions and borders. There is plenty to talk about here as companies will look at some if not all of the following:
Diversification: Reduce the reliance on a particular region. Localization: Bring supply closer to the point of use to reduce shipping, tariffs, border crossings, etc. Multiple sourcing options: Protect against sole sources.
Demand sensing and shaping. How do you prepare for the unexpected without having to predict the unexpected? Planners will need to be more predictive and model plans on actual market demand. Traditional sales forecasting will have too much lag to be of value during a pandemic.
Expanded collaboration. Like scenario planning, there may be an opportunity to redefine another overused word: collaboration. Many more people are needed to participate in resolution. Others, like C-level executives for example, will need to be in the know. External collaboration would include the integration of suppliers in preparedness planning and the communication of those plans to customers.
The human dimension
Any discussion about the supply chain must also take into account the people enabling it. During the pandemic, human needs were given top priority. Many of the boardroom conversations around bringing resiliency and agility to the supply chain ultimately will have that same focus of keeping people safe and healthy. This could mean supply chain risk indicators will be just as important as performance indicators.
Indeed, as the current crisis evolves, that emphasis is likely to become ever more important. At the outset, the focus for most manufacturers was on short-term crisis management. Today, they are taking more of a mid-term view and concentrating more on recovery plans. Over the longer-term, risk mitigation will be key. But across the cycle, supply chain planning will be vital in helping ensure these approaches work well and that businesses can best manage their supply chains in these times of disruption.
Bill DuBois is a director at Kinaxis. Eliminating volatility in your supply chain is impossible, but managing it is not. Trusted by top brands, Kinaxis gives people the confidence to know they are making the best supply chain planning decisions to maximize business performance. It solves complex business problems in easy-to-understand ways by combining human and machine intelligence to plan for any future, monitor risks and opportunities and respond at the pace of change.