Previous outbreaks of disease and natural disasters, such as the 2002-04 SARS outbreak and the 2011 tsunami in Japan, disrupted global supply networks, but their limited geographic spread meant that organisations elsewhere in the globe could mitigate their effects on supply chains by sourcing elsewhere.
While companies learnt valuable lessons from these incidents, such as the need to diversify supply chains and adopt leaner and more agile manufacturing and supply chain practices, the global coronavirus pandemic brings an entirely new test.
Every business is rapidly trying to assess the impact on the supply chain both in the short-term as well as the medium term. With supply chains tested to breaking point, businesses can prioritise actions that preserve and protect their operations and the communities they serve.
1. Create a remote sales and operations planning ‘control centre’
A single view of the end-to-end supply chain will help leaders actively manage shocks, keep tabs on supplier shortages, ensure cash flows through the supply chain, and optimise short-term operations – particularly with regards to critical suppliers and customers.
It’s the type of system being used by Siemens Logistics to forecast demand and quickly adapt to changes across the supply chain.
The use of machine learning and data analytics tools such as these to forecast demand spikes and disruptions has been shown to increase forecast accuracy often by 10-20 per cent, enabling better responses across the supply chain.
You’ll need to build your intelligence network quickly, actively communicating with suppliers to understand the changing situation and emerging risks. And your centre will need broader intelligence such as countries moving out of lockdown or specific hot spots of the epidemic, and data analytics support to give early alerts to upcoming problems and inform future plans.
Scenario modelling will be key. Leading companies are now including modelling of the epidemic spread and containment as a critical part of their operational planning. For example, you’ll need to plan your actions in those countries emerging from lockdown when supply and demand restarts while other locations are still in lockdown.
Early movers and those that plan ahead will be better prepared to win business and also manage any second spike of the epidemic that may come along.
2. Give logistics the same prominence as stock – it’s not only what you have but where you need it to go
The impact of consumer pressure on parts of the pharmaceutical sector and food retailers has been particularly evident on stock levels in stores. While pharmaceutical companies typically hold up to 12 months of supply in case of emergencies, spikes in demand and logistics issues have caused shortages such as paracetamol on retail shelves.
This flow of exports and goods has become a real challenge.
Difficulties may be exacerbated by problems such as ships’ crews needing quarantining because of infection, or in the logistics chain because of a shortage of haulage capacity. Drivers still need to adhere to safety rules about double-cabbing and allowing drivers to have the rest stops they need. Global air freight is also being slowed down as many airlines are not flying freight in passenger plane holds.
It highlights the fact that logistics chains are as critical as manufacturing capacity and availability in the short-term, with a major factor for leaders to remember: these supply chains are links of people, and their needs and wellbeing must be a central focus.
The welfare of those keeping logistics moving must be a priority - it’s the right thing to do and in turn it is the only way to ensure customers receive the supplies they need.
3. Learn on the go with new business and operating models
The speed of the current crisis calls for an agile response. While no leader should take unnecessary risks, the reins must be loosened to steer your way through tough times. Organisations will need to look beyond their own four walls and think about the wider digital ecosystem. The rapid increase in demand for online platforms and e-commerce, for instance, can set you up for continued success and better position you for any later return of the coronavirus.
Increased use of automation, for example, in processes such as purchase to pay or warehouse robotics can reduce the reliance on people to maintain the day-to-day supply chain, allowing for an increased focus on managing the risks.
Supply chain leaders will better manage risks and sustain delivery by acting as part of an ecosystem rather than as an individual entity, working with government and industry to prioritise customers, repurpose production lines, reallocate employees and adjust opening times and data sharing arrangements.
This means temporarily placing competitiveness to one side to prioritise community needs. For example, UK supermarkets have agreed with the government for elements of competition law to be relaxed, allowing retailers to pool stock, exchange stock data, and to share warehouse space and delivery vans.
The global impact of Covid-19 is likely to have a further considerable effect on supply chains as the outbreak in China and Asia is already in its third month, and Europe is barely a month into the crisis, as is the US.
As our world becomes increasingly more connected, we need to better prepare for, and anticipate, such shocks in future. But the long-term lessons can wait. For now, leaders should focus on the actions above to preserve and protect the communities they serve.
Tim Lawrence is a supply chain expert at PA Consulting, the global innovation and transformation consultancy
Image credit: Bergadder/Pixabay (creative commons)