As the novel COVID-19 coronavirus outbreak continues to spread globally, our hearts and prayers go out to the many victims, either directly or indirectly impacted by this pandemic.
We as a global community need to continue come together to beat down this virus and return to some revised sense of normalcy.
One of the obvious implications of this unforeseen and truly wide scale ‘Black Swan” event is, and likely will remain being, the visibility to the critical importance of supply chain management strategy, along with new considerations for various supporting processes and advanced technology tools.
As we remind our readers often, the banner to this blog was purposely selected to convey that Supply Chains Do Matter in supporting and facilitating the accomplishment of business goals. They further matter in the accomplishment of societal and social responsibility goals, and what COVID-19 has brutally driven to our eyes, the quality of life and healthcare to global populations.
As noted in a recent Supply Chain Matters blog commentary that initially revisited our 2020 Predictions for Industry and Global Supply Chains, what COVID-19 has exposed is a growing consensus that supply sourcing predicated solely on lowest-cost global region reveals glaring deficiencies to supply chain disruption risk and responsiveness among certain industries. This will especially be applied to those where domestic or near-shored supply chain capabilities will now be deemed to be in an industry or a particular’s business strategic interest.
The virus has additionally made naked the flaws of Just-In-Time inventory management processes across a globally stretched supply network product value-chain.
After 20 plus years of supply chain management education that has stressed overall accuracy of forecasting, sequentially phased steps in planning and multi-functional sales and operations planning (S&OP) phased decision processes, the challenge is far different. It is one of sense and respond, overall speed to detect or ability to predict and perform to pre-determined response scenarios. Connectivity, end-to-end visibility and responsiveness become the driving strategy.
In this paradigm, suppliers serves as an extension of agility and resilience and thus take on a role as a peer collaborator in innovation and strategy execution vs. a trove of potential cost savings.
Regardless of region, and particularly among certain industries, a lot of revised thinking and strategy reassessment is in-store over the coming months.
Supply Chain Strategic Emphasis
The term ‘supply chain’ has more and more become the analogy for describing all of the links of a product value-chain that begins with product design and ends with customer order fulfillment or a product return. It was rather easy for students to understand that any broken link in the chain incurred some form of short or longer-term disruption which required an effective response.
As we have often communicated to clients and readers, the new reality is no longer ‘chains’, but rather highly depended customer fulfillment and supply networks that are all electronically interconnected among various key processes.
Strategic supply management has become all too weighted toward lowest possible cost and product margin contribution at the risk of diluting an industry or business need for added agility or resilience to major unplanned product demand or supply network disruptions.
In the post COVID-19 context, consideration must now be made toward a strategy for supporting regionally clustered product demand and supply networks, each being self-sufficient or serving as a backup for another region’s unplanned exceptions.
A further manifestation of strategic supply management is that of minimizing inventory cost. Such strategies have indeed transformed many industry supply chains to highly efficient mechanisms. Today, Just In Time (JIT) driven processes have become the basis of regional and global manufacturing and distribution inventory flows while providing significant cost savings and efficiencies for many businesses, large and small.
COVID-19 has shattered JIT process parameters, along with exposing the vulnerability of JIT delivery models in times of extreme demand. While no model can compensate for market wide panic buying, the ability to effectively recover without the effects of inventory bullwhip will be essential.
When the time comes for learning, inventory management strategy will have to similarly take on a revised emphasis on managing both agility and responsiveness, which can sometimes be difficult.
Where new technologies will deliver their most meaningful benefits in the post COVID-19 era are in the ability connect customer demand and supply network physical and digital processes in near real-time dimensions.
Such technologies include more responsive, Digitally Enabled Response Networks that automatically monitor and provide early warning to unplanned events, or patterns to such unplanned events. Internet of Things (IoT) enabled by other technologies such as GPS laden sensors will eventually fill-in the needs for connecting network-wide physical objects, operating assets or physical things with corresponding control processes while technologies such as Blockchain will augment means of trust and validation of transactions and information.
One the most significant challenges brought to light by COVID-19 in the termed command, control or prioritization of demand and supply networks, the integration of information flows across various networks and the corresponding analytics and decision-making needing to occur among such networks. That includes industry-specific, multi-industry or multi-region and mode focused. Which products and which orders have highest priority? Which order channels, physical or online, are the most appropriate for customers and consumers? Which inventory has the highest priority and to which customers?
Decisions will take on a more network focused context, and with that, integration of key forms of network-wide physical and digital data assimilation and context. Prescriptive and predictive analytics will become more network oriented.
Forms of artificial intelligence and machine-learning based technologies will assist in the needs to detect and recommend various options of response, or in identifying hidden patterns of either customer demand or supply disruption.
Importance of People
Some of the most sophisticated aircraft and equipment or autonomous driven devices still require people to sort out the exceptions and problem solve unforeseen events. Recovery from the effects of COVID-19 have visible dependence on the innovation, creativity and resourcefulness of people all across the globe.
Developing a product design for a human ventilator in a mere 10 days, conversion of auto or electronics component factories to the production of medical equipment in a matter of weeks, or the production of various personal protective equipment by countless facilities large and small, sporting goods to apparel focused. Analyzing product demand related to panic buying and filtering the notions of subsequent bullwhip demand signals are manifested in the talent of master planners and supply network strategists.
They are each and all a testimonial to the continued importance of people.
People will always be the basis of innovation and resourcefulness and similarly, the revised strategies of the post coronavirus world of demand and supply networks.
We have shared a few thoughts on the future of multi-industry supply chain management strategy. Granted, many in our audience our deeply consumed with ongoing needs to manage the current response.
However, thinking of the future helps to get us through the pressures and challenges of today. Thinking of the future unleashes the creativity of tomorrow’s supply chain management leaders.
We encourage readers to share your thoughts on the concepts addressed above. Let us at least start the ball rolling for design thinking and co-creation.
Best wishes to all and remain safe and diligent
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