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Now is the right time for Supply Chains to do right things

Without doubt, year 2020 will be etched in the memory as a year of multiple disasterslike Covid-19 pandemic, Trade issues between US-China, Wild fires in Australia, Social unrest in Hong Kongdrastic decline in Oil prices as well as financial markets  and other politically dominated issues in emerging markets. All these events combined, plunged the global economies into multiple catastrophise like global shutdowns, negative economic growth and huge monitory and human losses.  The Covid-19 aftermath is so deeply engraved that in future, we can actually explain this phase  as  (BC / Before Covid-19 and AD / After Disease recovery)

It forced the world leaders, policy makers, businesses to shift their focus in a survival mode for most part of 2020 struggling to meet day to day requirements like employee safety, security of their products, brand and people, in the process manage to generate enough cash flow and retain customers centricity. Let me re-define the Covid-19 disruption and resurrection into 3 broad phases. 

Phase Iwas when (Mar-Aug 20)  it was complete disaster; supply & demand were severely imbalanced and entire world was forced to shut down. 

Phase IIwas when (Sept-Dec 20) China and a few SEA countries started to get back to fair amount of manufacturing capacities and international logistics resumed for essential services, pharma, food, groceries, medical devices, PPE etc. 

Phase III is current period which will drag deep into year 2022 for path to recovery for many industries. In this phase, business and supply chain leaders need to re-visit and re-structure their end to end supply chains.

Challenges caused due to Covid-19, implies Phase I

  • Global geographies shut down reducing exposure of human to human infections
  • Factories for most commodities (other than essential commodities, Pharma, Medicinal / Med Devices, Food & Groceries) were shutdown globally
  • China fully shutdown it is manufacturing output during this phase affecting consumers globally
  • Massive spread of Covid infections all around the globe with high fatalities in all geographies
  • Huge demand supply issues breaking the ever-so-fragile supply chain globally
  • Exposing massive dependence on One Country for most commodities including essential day to day consumer products

Recovery imperatives, implies Phase II

  • In this phase, most top class companies with relatively better supply chains, started to re-access the imperatives required to re-build resilient and agile supply chain
  • A few broad areas were identified as immediate levers to re-adjust and re-design
  1. Upstream planning – Better demand sensing, shifts in customer behaviours, predictive / prescriptive case studies, shift in inventory stocking strategy and customer service
  2. Manufacturing Planning– Agility and flexibility, Capacity planning, shift from Just in Time to Agile and resilient operations
  3. Sourcing – Visibility into Tier I, II and III suppliers, De-risk by developing alternates, Build practical BCP’s (business continuity plans) and China + 1 sourcing strategy
  4. Fulfillment and Logistics execution– Re-design networks, use of multi-modal distribution, collaborate with Tier I and II service providers, optimizing multi-lanes & route planning

Tactical and execution enablers,  implies Phase III

This is the most critical phase where the “Rubber meets the road”. This is THE Right Timefor the world leaders to bring about a changein their supply chains for right reasons.  This change was over-due, and Covid-19 proved to be a catalyst in many ways.  It is NOW or NEVER for Supply ChainsGlobally if they do not put their acts together !!!Highlighted a few execution levers that supply chains globally need to execute and NOW

  1. Changes in the customer profile, their expectationand trust.

 

Pre Covid19, consumers took safety & security of supply as “granted”.  The products they consumed were safe; the venues they travelled&worked were safe.  But COVID-19 has ripped those assumptions apart. Post Covid-19, consumers’ behaviours have changed.  Consumers now want safety, sustainability & transparency more than ever before.  And it is the responsibility of the companies to provide the ecosystem they deserve.


Balancing strategic imperatives such as risk, sustainability and winning consumer trust will challenge & may prevail over pure economics for many years to come.It is important for companies  to have their fingers on the pulse of public sentiment and build a supply chain which will compliment it.

  1. Renewed focus on Glo-Calisation (local execution)

Going forward, companies need to de-risk by rebalancing the supply chain with a more strategic mix of local, regional and global supply chains so if any disruptions happen in one of the supply sources, it will be easier to adapt and fulfil the need with the other. This requires a new strategic  way of thinking and a completely different business sense.  Logistics hubs will re-emerge at the local / mega city level.  sub-system suppliers and component suppliers will source, assemble, and deliver from their own backyards

  1. Escalating freight rates &severe capacity crunch:

 

Air freight rates have sky-rocketed to 7-10  times during Covid-19 period for most commodities. These new air freight rates will come down but at a significantly much higher % in relation to Pre-Covid19 period.  This is an after-effect caused by permanent loss of Air freight capacities globally. Supply Chains need to build this new element in their cost v/s customer service trade-offs & find ways to absorb the escalating costs.


  1. Strategically acquire or merge to increase leverage

 

Covid-19 has forced many companies to either fold over, merge or get acquired across the globe. As the pandemic will slowly start to subside during 2021, the M&A activity will be accelerated many folds.  Multinational companies need to expand their Local footprint using M&A as a hedge to gain competitive advantage in the market place.  This rise in M&A activity will create multiple operating models which will be complex in nature

 

  1. Form collaborative partnerships (horizonal and vertical):

 

There was a time when manufacturers and their suppliers were adversarial – beating up one another over price, specifications, schedules and more. Companies need to better understand the merits of collaborating with their partners vertically as well as  horizontally for a win-win solution.  Companies need to form long term partnerships in their Supply Network for enhanced negotiation ability, better visibility covering their Tier II and Tier III suppliers

 

  1. Trade-off storage needs-capacity crunch &escalating cost with customer satisfaction:

 

As companies work on reshaping their manufacturing / sourcing footprints, it will have a domino effect on their storage requirements.  This is especially applicable to Pharmaceutical /Temperature Controlled products i.e. (Vaccines) where the demand for GDP compliant storage facilities will be at a record high.  Companies need to manage the storag

 

needs v/s costs trade-off while maintaining regional capacities and meeting customer delivery expectations at the back of (local) compliance requirements

  1. Embrace & execute Multi-modal transportation model:

 

In order to reduce cost-to-serve impacts & build visibility of supply & increased resilience across delivery network, companies need to shift away from air freight & resort to multi-modal transportation.  We will see some growth in alternate means of transportation like rail, road & motorways globally during 202

 

  1. There has been a drastic shift in the profiles of customers buying on-line during Covid-19 shutdown especially for essentials,grocery, & medicine supplies.   Most likely a high % of these customers will never return to buying retail and continue buying on-line.  Companies should take this opportunity to invest in eCommerce platform as early as possible to deliver personalized shopping experience.

    Capitalise on the new wave of Contactless / On-line business models:
  1. Portfolio complexity has been a bug bear for many industries(FMCG/ Pharma/ Medical Devices) Companies with advanced supply chain capabilities have learned the hard way to focus only on winning products by adopting an age-old practice called SKU Harmonization or Assortment Simplification. When done right, assortment simplification will unlock significant benefits. First and foremost—and contrary to conventional wisdom-selling less often leads

    Reduce portfolio complexity / adopt SKU Harmonization:

to selling more  !!!  This is a right time for companies to re-look at their product portfolio and invest in product rationalization (harmonisation) methodologies.

  1. Review your customer value preposition:

 

A Customer Value Preposition is a promise of potential value that a company delivers to its customers to stimulate customer engagement.  Your value preposition needs to be in the same language as customers, so they are able to resonate with company’s products & services cajoling them to buy consistently. Competitive analysis should also feed into customer value proposition and can easily be accomplished using AI, Big Data analysis.  To win customers, companies need to define their value preposition and be able to communicate it effectively

 

  1. Train / empower your employees to work from remote locations.

 

The outbreak of Covid-19 has forced organizations into most significant social experiment of the future of work in action, with work from home and social distancing policies radically changing the way we work and interact.  Another imperative for company HR leaders is to evaluate the longer-term impact will have on their organization’s operations, work culture and strategic goals.  They need to identify & assess these trends which will change pre-COVID-19 strategic goals and plans

  1. Re-skill your employees to be comfortable with digital & advanced technologies

 

Leaders first need to recognize the difference between change and transformation before they can lead their companies on a journey of legitimate business transformation.  Transformation is not about technology, but it is about change in employee mindsets and reskilling your employees to feel comfortable with technology.  Your entire organization has to support the chang

 

to help employees’ develop new capabilities they will need to understand the impact on the business, culture and structure.  Companies, who are able to navigate /embrace this change will be in a better shape to mitigate the impacts to their business &continue to sail in troubled waters sustainably.

CONCLUSION

The current pandemic is a catalyst to rethinking how organizations are led, organized, and operated, which will lead to afundamental rebalancing of their supply chain and business operations.One key question business leaders / board members need to answer is What are you going to do to rebalance your supply chain model andensure to design a resilient, digitally enabled, agile supply chain operations of the future ??

The moment is not to be lostfor those organisationswho step up their game will be better off and far more ready to confront the challenges—and opportunities—of the next normal than those who do not.

One important aspect is human dimension will be back, and it will play an important  role in redesigning supply chains of the future. The Toyota Principle of “autonomation” (automation with a human touch) has proved to be the most adaptable during periods of crisis and there is every possible thought that going back to the board once again is the Right Thing to do NOW !!!  Let me end this article with a quote from a great leader …

 

 

Supply Chain Advisory | Talent development & Placement | Speaker |Writer     

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sanjaydesai.sld@gmail.com  | sanjay@humanainternational.com

+65 9842 6150  | +91 99203 62633

https://www.linkedin.com/in/sanjaydesai63/

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Sanjay runs a supply chain advisory consulting practice working with start-ups & small medium enterprise organizations.  He also runs Humana International, handling Talent Development and Executive Placement Services in Asia, based out of Singapore.  Prior, he has spent his entire career leading diverse and world class supply chain verticals for MNC like VeriFone Inc, Huntsman Inc, ThermoFisher Scientific, JohnsonDiversey, DELL Global, Apple, Exxon-Mobil, MOTUL, Rhone-Poulence and UniLever Brothers.

He holds a Bachelor of Commerce from Mumbai University and a Postgraduate in Materials Management from premier Indian Biz School.  He also holds a CPIM certification from APICS, USA. He has completed formal Executive Leadership management courses at INSEAD, Singapore

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