Navigating Supply Chain Disruptions and post-COVID Best Practices
As cash is being sapped and global organizations begin adjusting and writing a new normal, operations face unique supply chain hurdles that didn’t exist at the start of the year. Investors and CEO’s are finding that supply chain strategy is taking a predominant seat in every board room today. Our eyes are opened to the criticality of supply chain as a fundamental backbone to nearly every business today and into the future as we navigate what will presumably be a “new normal”. Traditional supply chain strategies have been tested and new alternative supply chain best practices are emerging.
For the first time in my career, “supply chain” is in the spotlight of every boardroom and every information medium globally. People are talking about it from both a demand and supply perspective and are gaining rapid appreciation for how supply and demand imbalance can rain chaos if your supply chain is not designed for agility and continuity.
No one knows yet the lasting impact of the COVID-19 pandemic. What we do know is that there is complete certainty around the future being uncertain. I came across this quote by an award-winning Japanese author, Haruki Murakami, and thought it completely relevant:
“And once the storm is over, you won’t remember how you made it through, how you managed to survive. You won’t even be sure whether the storm is really over. But one thing is certain: when you come out of the storm, you won’t be the same person who walked in. That’s what this storm is all about.”
This speaks to people changing. I attribute this equally to companies around the world who will undeniably be changed on a global scale.
Supply chain is at the very core of delivery of any future scenario plan and a business’s agility to “boom” coming out of our current economy is essential to success.
Predictably, markets serving the pandemic are surging with more demand than can be supplied. Pre-COVID markets that were emerging and growing are now stalling – simply working to survive until the economy turns. As we come out of the pandemic, the return of slower growth industries during this unprecedented time will rebound – the extent of the rebound will be dependent on new consumer behaviors borne and accelerated from the pandemic disruptions. With no other alternative, consumers have shifted predominately toward digital buying experiences and a business’s ability to serve the shift innovatively and with differentiation is paramount.
e- Commerce is at the forefront of this movement. In essence, the way consumers purchase is undergoing a major paradigm shift.
- Panic Buying has Subsided. However, the rate at which markets rebound is still highly repressed to essential buying and is predicted to continue for some time.
- Consumers have relaxed expectations of On-Demand Delivery. One to two day delivery expectations can be extended to within the week, in any industry, if delivery expectations are set in the consumer buying experience.
- Consumers demand a heightened expectation for more supply chain transparency. Providing a digital shopping experience is paramount to future success and a delivery promise to consumers at time of purchase exponentially impacts willingness to extend the speed to market window affording a more cost-effective supply chain.
These and other macro-economic factors have generated a market demand shift that disrupts traditional supply chain practices that are most likely here to stay. Bulk ordering is being replaced with Unit Orders. Purchase orders are being replaced with digital shopping carts. In today’s environment, we are retraining consumer expectations – you should expect it all – competitive price, free shipping, one-click buying, delivery in just one or a handful of days. All while investors demand rising profits. Supply chains are simply not agile or resilient enough to withstand the surmounting pressures of tomorrow’s demands. Nor are they prepared for continuity in the face of economic inevitabilities.
Supply Chains are, and will, increasingly be required to flex with consumer demand. Regardless of industry, product, or geography, the “new normal” will be predominantly driven by consumer demand and delivery expectations on an order by order basis. Effectively, you have to continuously synchronize this with your supply chain.
Here are a few key points to consider when evaluating, synchronizing, and operationalizing your supply chain for the “new normal”:
1. Aligning Supply Chain with Shifting Consumer Buying Demands
Forecasting based on historical trends, a common driver of supply chain design and flow, no longer paves a path for future planning. Scenario planning is key in today’s times and having the ability to pivot the supply chain quickly is now an imperative and cash conserving strategies are the priority now and into the future. As demand shifts, your supply chain footprint must be appropriately designed to meet speed to market and possibly global demands. Large distribution centers strategically located versus many “micro” centers close to your consumer markets is a first look at where and how much inventory you should deploy throughout your supply chain. Having the right product in the right place at the right time is key to meeting tomorrow’s consumer demands most cost effectively.
2. Diversifying Sourcing Strategies
If you consider that the e-Commerce shift means distributing faster to your marketplace, it begs the larger question on most people’s minds today. Should we be sourcing offshore or bring it back home to the United States in the future? If you consider total landed cost of offshoring, nearshoring, and domestic sourcing, you will get a true financial decision indicator by which to decide. However, this is no longer an exclusive decision of either/or. Fortifying supply chains with business continuity planning has never been more of an obvious necessity. “Multi-sourcing” suppliers of key products/raw materials hedges risk of shortages by creating redundancy in your supply base. The key is to diversify your sourcing and logistics strategy for both supply and transport of your ordered product and finished goods. Mapping the full supply chain from primary and alternate sourcing points including logistically how orders will deliver and under what service constraints should be a function of your supply chain continuity playbook. In summation, design continuity into your supply chain and tie it to your scenario plans in order to pivot your supply chain with little disruption under any circumstance.
3. Digitizing your Customer Buying Experience
e-Commerce is no longer a Business to Consumer equation that impacts retail and consumer product markets but now impacts all industries and types of supply chains. Business to Business and Business to Consumer expectations have merged on one standard medium for conducting business – digital buying and delivery. Business survival during the pandemic lockdown instigated a surge of digital buying experiences. Adopters quickly learned that the ability to service orders from a, now global marketplace, becomes the imminent challenge to capturing the benefits on opening up your business to new consumer markets. Supply chains must be configured for e-Commerce to ensure your business can capture the benefits of a broader market with delivery speed at an economical cost.
4. Digitizing your Supply Chain to meet Speed Imperatives
Equally important to your customers buying experience is their delivery experience. This is where you have the most opportunity to be inventive and differentiate from the marketplace. An agile supply chain network with rigorous operational execution is the mechanism for meeting “new normal” delivery experiencing demands. However, not everyone has to compete with same day, one day delivery promise. Consumers are willing to relax delivery expectations if there is fully transparency of delivery promise in the digital shopping cart. Consider prominently displaying expected
delivery day/timeframe at time of order. Additionally, consumer order tracking is becoming more aggressively innovative (think “Uber street level tracking” for all orders no matter where it is in the world or how it is being transported. The more consumer transparency, the more tolerant of longer lead times opening cost effective options for inventory placement and order fulfillment operations.
While these concepts have been around for years, they have been considered progressive differentiators. Today, and into the near future, they are rapidly becoming essentials for future business success. It will become increasingly important to maintain a single, unified supply chain. While complexity comes into play here, the financial incentive is well worth investing in agile supply chain. Focusing on the above, will help create a digital supply chain that unifies your market channels providing transparency, creating collaboration, and empowering innovation—ultimately providing customers of all kinds with a seamless, differentiated experience.