The health crisis continues to leave consequences in its wake. On the health level, of course, but also economically. The global economic scenario is being affected by the effects of Covid-19, which are increasingly evident in different sectors of activity.
The situation has alerted the entire business ecosystem that fears that the stoppage of activity could affect their supply chains dependent on a global system.
An unprecedented global and critical landscape that greatly hinders current trade relations across political, cultural, and social borders. The truth is that the implications of this new scenario for small and medium-sized companies, which make up an important part of the supplier portfolio of large companies, are notable.
The Supply-Demand Shocks
The spread of the coronavirus pandemic (COVID-19) is causing major disruptions in the way people access goods and services, and thus in the way supply chains operate. Immediate outages were similar and widespread across the globe: toilet paper, cleaning products, alcohol gel, face masks, and thermometers sold out in supermarkets and pharmacies.
In the words of economists, a demand shock for essential products. Simultaneously, global supply chains are also experiencing a supply shock. The origin of the pandemic in China, with the consequent closure of factories and the decrease in port, airport, and rail operations, has impacted the supply of many industries.
Likewise, travel restrictions along with the implementation of long periods of quarantine and social distancing that restrict labor mobility have also slowed and/or disrupted supply chains.
For example, quarantines of up to 30 days in force for aircraft and ship crews in certain countries have resulted in great operational and financial stress for air transport companies and shipping companies.
# The Supply
As the virus was taking a toll on China in early 2020, many were busy calculating the repercussions it will have on the supply chain channels as China is one of the big markets and an active node of trade.
Gradually, there occurred the scenario of goods disruptions where companies sorted out their production as per their feasibility to meet the demands.
# The Demand
To control the situation, countries proposed and implemented lockdowns which led supply chains to pull back many of their services which further brought them to witness demand shocks.
Toilet papers set the biggest example in front of us where the end consumption is stable as of now. Fortunately, food supply chains reacted exceptionally to the massive spike in demand, reassuring people in this depressing time.
Source: spendmatters.com
Developing a Resilient Supply Chain Network
Here I have put down some workable ways and steps for manufacturers to help them equalize their supply chain systems and networks to cope up with the unprecedented changes transitioned worldwide.
NetSet Software is also learning from the effective techniques provided below and is making the best efforts to continue its services without any disruptions amid the corona crisis.
1 Conduct Risk Assessments & Nail the Pivots
Responsiveness, proactiveness, speed, and decision making are the key factors to spin the wheel of success during the critical time of the novel coronavirus spread.
Get connected with the supply chain system partners (logistics service providers, suppliers) and perform the following:
- Identify
Ever-changing supply-demand variants to act wisely to eliminate the loopholes in supply, transportation, production, and warehousing
- Define
Goals and action plan feasible as per the temporary crisis. Reform and create result-oriented resilient strategies to maintain the supply chain networks and ecosystems to balance the cycle of supply and demand, deriving appropriate sales and revenue.
- Deploy
Deployment of products is possible only if the workflow strategies, resources, and manpower are aligned well as per their roleplay and KPIs which will drive the ecosystem’s visibility dynamically.
2 Prepare for Employee Absenteeism
Absenteeism of employees is a real-time situation that manufacturers must be prepared for, looking at the tough time of crisis. The restrictions imposed on travel lowered the availability of local laborers as well as migrant workers to return to work.
This calls to limit non-essential travel and implement flexible and feasible working policies and arrangements for employee safety, keeping exceptions for production line or distribution center workers.
Think practically: Loss of productivity caused due to the fall in the number of working employees (sick leaves, impacted by the virus) can be significantly less expensive than a prolonged downtime from closing an office site, the entire plant, or distribution center.
It’s better to work less being safe rather than work more with infected persons, directly or indirectly disinfecting the site and causing adverse impacts.
3 Pay Heed to Workforce/Labor planning
Amid the time of the outbreak, restarting operations will present unique challenges as workers gradually rejoin to work. Enterprises need to focus on the considerable measures to resume their business operations and ensure to possess a healthy normal work environment and routine.
Nevertheless, ‘back to normal’ situations won’t be achieved easily and would take longer than usual. With ongoing restrictions and imposed rules on commutation, it will be hard to ramp up to the full capacity and potential and requires close heed to be paid to labor planning and product quality with the scarcity of both material and required workforce.
4 Set Prime Focus on Supplier Risks
Here comes the need for you to separate your direct suppliers and understand their capabilities to fill the supply gap and meet essential requirements, eliminating encountered risks.
Get clear visibility over inventory, production, and purchase order fulfillment, and understand the possibilities and flexibility of shift production and transport to other locations, dealing with your key suppliers.
Remember, suppliers will treat you from an allocation perspective regarding shortages, outages, and inventory management where you would not only be the last option for them, therefore, you must hunt for alternative ways and plan accordingly to minimize the impact on your firm.
5 Illuminate the extended Supply Network
To keep the Tier 1 running, it becomes significant to pay close attention to the Tier 2 supplier status and beyond, that further impacts Tier 1.
Work with suppliers for alternative plans, alter rules and methods of work wherever needed to keep your business plants running at the maximum efficacies. The traditional ways of working won’t give fruitful results within the prevailing unprecedented circumstances.
Establishments with complex supply chain networks, systems, and hierarchies need to extend and scale their approaches and techniques to alleviate supply-side risks, embracing digital modes to enhance the network for gaining a clear view of critical components of the supplier network.
6 Apply Digital and Automated Approaches
Endorse smart digital methods in communication and other manufacturing operations to mitigate reliance on labor-intensive roles and workflows.
Businesses, today, must favor digital technology to aid standardization of routine work and jobs, done remotely or physically, as they can reduce the dependency level of relying on individuals to run elementary operations.
Artificial Intelligence, IoT, big data capabilities can bolster your manufacturing systems and foster a digital ecosystem of connected devices, rendering relevant and useful data in real-time, thus enhancing decision making.
Automation will help you reduce manual and repetitive tasks and enable you to run business operations with interchangeable shifts of employees, lowering labor needs.
7 Identify and Proceed with Alternate Sources of Supply
Amid the troublesome situations, one must look for secondary ways to enhance supply sources and secure capacities and inventory and grab opportunities for resource pools to gather raw materials.
Look out for non-impacted areas for alternative sourcing markets with supply chain and manufacturing expertise, exploring the diversifying geographical location beyond the boundaries of China. (Most likely markets include, Brazil, Mexico, Chile, etc.)
8 Reshape Inventory Policies and Parameters
The demand and supply variability has inclined differently, where the rules, policies, and practices followed earlier would not deliver productive results.
There arises the need to consider and mark the ways to refine inventory strategies to reduce the adverse effects on business due to supply shortages and risks, equalizing the basic factors like cash flow, supply base risk, perishability, etc. on an immediate basis.
Set safety stock parameters to buffer the demands and supply variabilities with delineating planning and precision.
9 Enhance Inbound Material Visibility
In this step, you need to acquire insights about delivery performance from the supplier’s end. Expect delays and declines in the delivery status and type (on-time and in-full respectively).
You need to make efforts to acquire the visibility of inventory status at supplier’s production, schedule, delivery, location, and shipment in order to predict the supply gaps and disruptions likely to occur.
If you lack digital connectivity with suppliers over the inbound flow of products and materials, you must get access to data and management tools to enhance business visibility and feasibility of trading amid the corona outbreak, further empowering decision-making skills.
10 Pay Attention to Production scheduling
Create an agile and adaptive environment and prioritize the products to accelerate sales in the event of raw material shortages. Refine your production schedules as per the availability of resources and manpower to reduce the expected disruptions in the supply-demand concept of trade.
Take care and ensure that the production of the crucial part or component and your capabilities to build them without experiencing the risk centered situation of going ‘out-of-stock’.
There might be many small and medium enterprises that might not possess the necessary tools for calibrating re-planning and scheduling, and for them, Supply Chain War Room becomes the critical need as a short-term solution in the present time.
Final Say
The spread of the deadly virus is impacting communities, supply chains, ecosystems on a whole which calls for global scenario planning. This involves understanding the potential risks seen as per locales, regions, and nations and determining appropriate actions and steps to proceed to mitigate ourselves from the posed threats.
Supply chains today face a disruption risk not seen since World War II.
The experience of affected countries in the first wave of COVID-19 shows that avoiding disruption in supply chains is key to ensuring food supplies to a quarantined population, as well as providing medical supplies to health centers to combat the pandemic. At the same time, the operation of these chains contributes to reducing the serious impact on the economy, keeping some of its sectors active.
