June 22, 2020
by Mike Croza
If you’ve managed a supply chain in the last decade, chances are you’ve been advised that an optimized supply chain is nimble, agile, flexible, responsive and scalable. As we navigate the ongoing effects of COVID-19, you’ve likely seen “resilient” added to the list of terminology.
However, this crisis has shown us that for the most part supply chains are anything but resilient, and far from nimble, flexible and responsive. As of June 19, many of our clients with both offshore and domestic manufacturing are awaiting inbound shipments for past-due customer requirements, and we anticipate this continuing for several more weeks. Given most officials project a second wave within the next six months, supply chains and end consumers will be stressed even further.
While we’ve all seen great examples of manufacturers being able to retool operations to quickly produce needed goods such as personal protection equipment (PPE), it’s clear many companies have learned the hard way that their supply chain is brittle, inflexible and slow to respond to changing market needs.
One of our colleagues, Greg Christopher, describes this current state as a byproduct of a decade’s worth of “leaning out the processes and tasks for optimal profitability using ERP systems designed to drive internal efficiency.” By following a linear “lowest-cost solution” to gain the best short-term financial results, companies have made it impossible to pivot operations to respond to massive shifts like the global pandemic we’re currently navigating.
So, where does this leave us? Knowing the next pandemic or global crisis is not a matter of if, but when, we’ve pulled together some best practices we’ve learned in our 27 years of helping companies build a more resilient supply chain.
Start your supply chain strategy at the top
Supply chain needs to be baked into a company’s overall business strategy and values, and this integration begins with owners and C-level senior leadership. Without top-level sponsorship, the process of envisioning, developing and implementing a new supply chain strategy won’t result in lasting change. We’ve seen this time and time again – both when it works and when it fails.
Clearly define roles and rules of engagement
Who is accountable for the supply chain? What are the rules of engagement? Blurred lines can lead to internal confusion and flux, which ends up impacting the customer experience. When the unexpected happens, organizations need a clear understanding of who is steering the changes and what procedures to follow.
Invest and keep top talent
Organizations need a supply chain leader with the right experience and skills to help build the strategy, communicate it up and down the organization, and provide day-to-day leadership for the team. As the saying goes: “ A Players hire A Players, B Players hire C Players”. It’s People that make the difference. Create a transparent environment that incents and encourages creativity and teamwork. Make sure company and department goals align with Executive goals.
Build deep, transparent relationships with 3PL partners
The most successful client/3PL partnership we’ve seen to date was between Walmart Canada and its 3PL at the time, SCM, which was a division of the original Tibbett and Britten Group (later acquired by Exel in 2004). Formed in the mid 90s, this partnership was so important that SCM’s senior executive sat in on Walmart Canada’s board meetings. This is a lesson in how a trusting and transparent partnership, managed by well-defined joint expectations and tied to meaningful key performance indicators, helps companies build flexibility, allows it to tap into needed resources and helps it grow and scale
Build processes that can re-plan the supply chain quickly
A monthly integrated planning cycle may no longer be enough to properly interpret and act on future demand and supply patterns. Demand and supply managers will need more manual yet expert turning of system attributes like lead-time, MOQ’s and safety stock. They will also need a greater understanding of the data flow to interpret the demand signals, inventory coverage and supplier orders. In the pandemic’s early days, capturing micro/regional demand was key to figuring out the variability given the number of retailer shut-downs, the burst in e-commerce channels and the spread of the virus by region. Our longtime partners Mike Doherty and Jeff Harrop from Demand Clarity (co-authors of Flowcasting the Retail Supply Chain), say the crisis has shown us that organizations need to implement an integrated, time-phased planning process for each of their sku/locations from consumption to supply to allow micro/regional demand plans to be revised and then automatically translated (i.e., flowcasted) into projected flow, inventory, and order plans for all supply chain partners.
Boost visibility with the right technology solutions and data capture
Without end-to-end supply chain visibility, companies are feeling the weight of COVID-19. One way to achieve this transparency is through a Control Tower technology and data capture process. While this management practice isn’t new, not all leaders understand how it can support decision making within the supply chain. By combining these visibility capabilities with expertly run “what-if” scenarios using various modeling tools, organizations can overcome the static and inflexible supply chains the industry has built over many years and gain a competitive advantage.
As we continue to battle the effects of COVID-19, organizations are being forced to continually pivot to survive. Building a resilient supply chain is not about returning to normal. It’s about building capacity to recover quickly in the face of a crisis. And that may mean dismantling some of the thinking and processes the supply chain industry has relied on for many years. Having a “resilient supply chain” are nice words, but getting there is a journey worth the effort.