Disasters like Covid-19 pandemic can wreak havoc on even the biggest of company’s business. Even when your employees and office space are secure, the difference in a time of calamity lies in having a secure and resilient supply chain. In this article, I explore how the direct competition between brands is no longer relevant, and why the only competition that remains is between the companies’ Supply Chains? I will also take a look at different ways that leaders can employ to build secure resilient supply chains for their businesses.
When the news stories related to the pandemic started breaking on the internet, none of us could have realized the massive scale of the calamity. Given that such a disaster only happens once in a century, we can be forgiven for that. However, what we can’t forgive ourselves for is putting all the eggs in one basket, when it comes to securing our business supplies.
The recent disruption of global business supply chains is mostly on account of them being either concentrated in a single geographic area or following just-in-time manufacturing and lean production strategies to cut costs. Such businesses now find themselves in a precarious situation with a noticeable shift in the customer consumption patterns, where purchases are now more inclined towards local availability, followed by how responsibly the brand behaves, as against the earlier considerations of price or favorite brand/product.
While the saying goes that a chain is as strong as its weakest link, the same stands true for any supply chain. The impact of Covid-19 crisis on supply chains can’t be more stressed. According to a recent McKinsey survey of senior level supply chain executives, the study found that 73% businesses that were surveyed had encountered issues with their suppliers, while 75% faced issues with production & distribution, and 100% of the respondents in food consumer-goods industries had encountered production and distribution problems.
A separate IDC survey on ‘Supply Chain Agility in the Pharmaceutical Industry’ found that 46% of respondents had faced drug shortages during the pandemic, while 70% agreed that their supply chain was very vulnerable or facing more problems with the continuation of the pandemic. 65% of the respondents in the survey also reported that they could no longer accurately plan supply and had lost faith in their demand forecasts; and a stark 43% respondents lacked necessary agility and redundancy to survive major business disruptions.
With businesses in the past few years moving towards globalization, they are facing increasing challenges in terms of acquiring customers, onboarding workers and vendors, finding partners and suppliers, and ensuring continuity of business in the pandemic.
Today the biggest question that all manufacturers need to answer is – Which strategies should they employ to mitigate the disruption risks for supply chains? And, where should organizations start?
To thrive in the ‘New normal’, organizations will need to rework their business models and be open to a shift in mindset. What’s needed today is true transformation by altering the very fabric on which a business operates – how the Supply Chain is planned, managed, and ensures last mile delivery. In fact, I would say everything from building capabilities to changing the work culture and elevating financial performance will only be sustainable once businesses adopt this transformation.
Here is my handpicked 10-point approach for any such business looking to ensure continuity of service by building a secure and resilient supply chain:
- Build an early warning system
To be resilient business, they need to develop a balance between just-in-time manufacturing and lean production strategies and developing AI & Analytics powered Early Warning System models within Supply chain risk assessment tools. Such tools can offer complete visibility across all levels and can sound off alarms whenever they identify any slowdown, interruption, or any other issue. Early Warning System based on well-defined predictive model, KPI and leading indicators can also help businesses identify their weak links in supply chain, so they can plan around it by building redundancies.
- Diversify Manufacturing and Supply Chain
While in the past two decades businesses have built their supply chains around cost optimization, the current pandemic has shown that this may not be the best practice. Lower levels of available inventory and disrupted supply chains have driven many businesses into the ground.
In the next few years, businesses should focus on simplifying their product portfolio and diversify the manufacturing capability (aspects like different locations, different suppliers) so that they can keep their manufacturing and supply chain differentiated. The ability to operate alternative sites for manufacturing and securing supplies from different suppliers may add some extra (and might require some discipline in Quality assurance) cost but provides insurance against any disruption.
- Create an agile Supply Chain
Businesses need to create a much more agile supply chain. This can be done by collaborating and sharing data between all stakeholders involved in building the supply chain. Both agility and resiliency can be improved by new near real-time B2B integration (advanced Connected Platforms) and sharing data down the supply chain. Especially, with the Tier 2 & 3 suppliers, providing them more visibility of plans can allow them to scale production in a much smoother manner.
Creating a coherent digital strategy to combine global & local supply chain strategies, by using insights from data to derive competitive advantage and to achieve business outcomes, should become the new normal.
- Fresh Commercial, Contract and Delivery Strategies
The main issue with the pandemic has been a restricted geographical access. Thus, I would like to see a much fresher approach by businesses to explore and identify new commercial strategies to fuel growth in areas that were left untouched before the present pandemic.
- Relook at contracts and redundancies in supply chain
COVID-19 has highlighted many vulnerabilities in the conventional strategies being utilized for building supply chains. Businesses need to work on a more collaborative model and redefine the contracts with your suppliers, vendors, and partner ecosystem. Contracts need to allow for new set of KPI, location independence, risk & rewards mechanism, elasticity in supply, cash flow, payment terms and most importantly redundant paths for single point of failure in chain including alternate routing.
- Identify New Last Mile Delivery Channels
With things not remaining the same as before, businesses need to invest more in restructuring their last mile delivery channels, via identifying new ones. E.g. Order online pickup in store, Curb side pickup, Delivery using Robots and Drones
- Operate a Hub-Spoke Model for Vendor & Supply Chain Relationship
Organizations should centralize any information necessary for the core functioning of the vendors & supply chains to prevent against any eventuality where the concerned managers may not be available. They should also look to localize various vendor relationships and delegate decisions to local teams.
- Implement resilience-as-a-service
Businesses are being crippled by losses as insurance providers are introducing new insurance policy exclusions. They need to understand that traditional insurance is not adequate when dealing with pandemic related business interruptions. The best insurance in future against incurring any such losses is prevention itself. Building resilience-as-a-service into the system is now a necessity.
I would rather take it to next level and recommend to “Apply Chaos Testing model for pandemic readiness”. Businesses need to test and investigate their pandemic readiness regularly very similar to the Chaos testing frameworks used in IT application domain. They need to implement a workplace pandemic preparedness plan in sync with their continuity plans. They also need to investigate their vendors and supply chain providers’ pandemic preparedness plans to stay ahead of trouble.
- Leverage Technology as Business enabler
- Scale the use of Responsible AI
Data-driven reinvention of business practices will be critical in post-pandemic growth. Businesses will need to embrace the use of responsible AI capabilities to both recover and return to their pre-pandemic growth plans. Business would need to leverage AI across there supply chain, business processes, customer experience and employee experience. Who does it more professionally and ethically, will be the key.
- Accelerate Digitization
Businesses should adopt the use of digital data and insights more extensively as part of their strategy. Cross-platform digitization can help them understand things clearer and faster to predict and prevent unnecessary blockages in their supply chain & vendor management structures.
- Apply Systems Thinking
Leaders need to realize the importance of system thinking as the missing skill-set in this whole pandemic scenario. Businesses should utilize systems thinking to look at a holistic picture of all the interconnected ecosystems. They will then be able to predict evolving complexities and the risks associated with them.
- Define new processes & create multidisciplinary teams
To be successful in future, businesses need to define more flexible, adaptive, and resilient processes and establish multi-disciplinary teams to define new process and innovate for new products.
- Adopt cloud first approach (instead of just looking at Cloud for cost reduction)
As business stakeholders are redefining products, services for new customer experiences, IT needs to catchup with fast pace to deliver new application and new functional requirements. Enterprises need to take Cloud first approach. Cloud first approach would allow for faster innovation with lower cost and allow enterprise to focus on core functionality instead of building resilient IT platform.
- Reduce Technology DEBT
As organizations are looking to scale up their technological capabilities including the IT & Cloud infrastructure to be ready for the new normal. Some of the areas that I would recommend reducing Technology debt are:
- Modernizing any legacy systems still in operation
- Ensure core applications are architected for resiliency and has a good business continuity and DR solution implemented
- Reduce the skills risk of legacy systems on Mainframe, IBM I series, COBOL, DB2, Solaris and older 4GL
- Embrace DevSecOPS
- Adopting a Low-Code / No Code approach
- Develop new strategy for remote working and Social Workforce Management
Developing a remote working strategy for your business can ensure that everyone can securely access the tools they would require to work remotely; including any access to business systems, consisting of HR, ERP, payroll, CRM, unified communication (UC) & collaboration tools, file storage, and email. While at the same time, setting up an omni-channel workforce management system should also be a priority, with increased focus on employing digital solutions to tackle the new challenges.
The IT departments need to evolve to the needs of user requests in the future, and how they would differ when working from home and not in office. They may even have to look at allocating time to help users with basic tasks like securely connecting to the network. Also, upgrading VPN should be a priority.
- Focus on Upskilling and Skill Rotation
Increasingly companies are discovering that remote working scenario has created a mismatch between the type of skills that are needed and what their employees have. As business leaders turn to automation, digitization and value data extraction, the workforce should be able to complement the value that is being added by the new technology.
- Re-imagine processes and productivity for composite AI
While businesses have been automating processes for efficiency in operations, they need to do so for every department in a post-Covid world. Utilizing composite AI to re-imagine the ways of doing business while factoring in various productivity scenarios will be an in-demand strategy in the new world.
- Get the HR Ready
For businesses to make remote working a more responsible process, the HR teams have to come up with their own set of remote working procedures that can communicate organizational expectations to employees and also ensure any upskilling that may be required on their part. HR & IT teams need to work in more cohesion in the new world.
- Innovate for New Products and Services
In a new interconnected world, to drive realistic customer demand and to sustain continuity of business, organizations should look to create a ‘digital twin’ of the entire supply chain (or of key processes) to simulate and adjust for the developing scenarios.
Also, an increased dependence on subscription-based models should help cater to evolving customer demands. In short businesses need to shift to Product Mindset and leverage technology as enabler to define new services and subscription models.
- Invest in Cybersecurity
Businesses need to ensure that their cybersecurity teams are all geared up to protect their data, applications, and resources from any kind of threats or to respond to alerts. As remote working finds a more comprehensive place in the business ecosystem, CISOs must draft new security policies (for Data Security, Network Security, App Security, and Remote Wipe Out) to accommodate for the increase in telework.
What’s the future for Global Supply Chains?
While ‘Globalization’ was the talk of the town in the 90s, I feel that eventually, global supply chains may end up becoming a victim of their own success. As businesses were over reliant on strategies focused on cutting costs, they had increasingly become less flexible and resilient with their supply chain structures. This needs to change, and the ones to adapt quickly will be the new market leaders.
Also, the new shift in customer buying patterns will mean that it’s no longer about buying a favorite brand but buying what’s available locally. On-time availability with a choice of last mile delivery will also factor in along with some other considerations like – which brand is known to be a more ‘Responsible Business’, instead of just the price or current promotion. Business leaders need to Act Now and relook at their strategy for building resilient supply chains with innovations around Social Capital Management, new products, and services with subscription models. In the next few decades, success of your business would be defined by how resilient your Supply Chain is instead of just the pricing and marketing campaigns.