Since the outbreak of COVID-19, supply chain has been challenged globally with issues like raw material supply continuity, factory shutdowns, and demand surge for some; while receding for others. This in turn results into stock outs, or piling – along with the change in consumer preferences, which can prove to be detrimental to the business. We have faced global disruptions like trade war, natural disasters or virus outbreak previously, but the magnitude of this kind has raised new and unprecedented questions on the supply chain resilience levels and the overall approach to manufacturing.
A lot has been done by the supply chain professionals across the globe during these pandemic times and they continue to do more, to mitigate impact on product supply continuity. Once the pandemic passes and global economy begins to function normally, the million dollar question is – will these very same professionals resume the management of supply networks as in the past, with the lowest cost supply & minimal inventory levels, or take a judicious approach in building the much needed resilience against future shocks? While the earlier approach worked well in a stable global economy, considering the series of events that the world has seen or had to manage, it brings increased level of risk to the table for businesses across sectors.
Acting as a catalyst to the argument is the study done by WEF (World Economic Forum) in 2013 which states that on an average, supply chain disruptions can reduce shareholder value by up to 7% & is more or less certain that if this exercise is repeated now, percentage value will not be in a single digit. So, one of the lessons learned is Supply Chain disruptions have proven to be resource intensive if you are to go by the trajectory of all unprecedented events of the past. The ongoing pandemic being a significant one, its disruption value is even harder to trace.
On a lighter note, such events are very inclusive in nature & equally impact organizations irrespective of their scale, be it MNC, MSME or a very small local business. Such situation calls for change in strategy & if one doesn’t act swiftly, it may lead to businesses permanently shutting down. All these factors accentuate the need for resilient supply chain infrastructure. As I could jot down while keeping objectivity in mind, the solution is twofold, which every organization in their respective capacity should work on to sail through any difficult situation.
The nerve centre remains a robust business continuity plan, to tide over what we all are currently facing, supplemented by a strong technology backbone to drive business solutions.
Business Continuity Plan
Be it suppliers, alternate manufacturing solutions / capabilities or securing logistics capacity, continuity is the key.
- Supplier’s supply continuity: It is important to ensure dual or multi-sourcing of key commodities to reduce reliance on one supplier or geography, build strong relationships with key suppliers by co-investing & running support programs that matters, establish systems that provide required visibility of supplier’s supply concerns ideally in real time, which enables risk analysis & swift reaction.
- Alternate manufacturing solutions or capabilities: Organizations should continually invest to automate, be flexible with decentralized manufacturing model to take care of dire need of production at times, redefine external relationships to capture new opportunities from cross industry collaboration and recurrent reviews to reduce product complexity that aids to refocus on key strategic directions.
- Securing logistics capacity: It is equally important to anticipate & be flexible on modes of transport to secure logistics capacity, so that the product can be moved in line with the demand requirement.
Most importantly business continuity plans should not just be on paper but be implemented like mock drills that we have at our work premises (definitely not to that frequency). Having a sound plan in place & ensuring action on it will ensure the much-needed resilience in product supplies during a crisis.
Technology, the game changer for synchronized operations
Technology needs to be at the forefront in every aspect of business. Organizations need to have a technology enabled holistic view of suppliers’ supply continuity & consumers’ demand coverage inventory, where manual intervention is minimal. Ideal supply chain world would be to have supplier & consumer concerns addressed through info received from one single synchronized tech platform that connects & provides required visibility in real time, to pro-actively run risk analysis & react fast.
The need of the hour is to have consistent investment in automation of manufacturing, warehousing & logistics activities, which will further abate the impact on product supplies. However, all this is possible only when an organization has invested in their most critical resource – human resource. It goes without saying that human safety & well-being is of utmost importance to drive systemic efficiencies.
To conclude when I think of the function of the supply chain, I remember the resonating lines of Tom Peters, famous writer & author – which in my rendition is Leaders win through Logistics. Vision, sure. Strategy, yes. But when you go to war, you need to have both toilet paper and bullets at the right place at the right time… In other words, you must win through superior Supply Chain. The key to winning the battle in the current business landscape is to build supply chain resilience, not just for today, but for the future as well.
This article has been authored by Raghav Vaghela, Operations Head, IPM India Wholesale Trading Pvt. Ltd. (India arm of Philip Morris International)