8 Considerations for Post-COVID Supply Chain Planning
Dave Food, Strategy Director of Prophetic Technology, discussed in a recent webinar how companies have adapted their supply chains during this crisis, and provided guidance in planning for recovery and future uncertainty. We’ve captured the key takeaways from his presentation below to help you prepare for the ongoing business impacts of pandemics such as COVID-19.
Let’s begin by taking stock of where we are right now as a consequence of the latest pandemic, COVID-19, and then think about what that means in terms of future risks and opportunities. In some environments everything has slowed down; in other areas everything’s accelerating, and decisions need to be made in minutes and hours. That’s resulted in new priorities. There are also new rules emerging.
Ultimately, this is a puzzle. To be able to understand how to solve the puzzle, you have to disassemble to reassemble. When I look at this pandemic response puzzle, these are the key elements I see.
- Current Pandemic COVID-19 and its impact in China. This resulted in manufacturing shutting down and significant constraints on supply. We can see the impact on a whole range of industries; supply chains were impacted and lead time suddenly became impossible to predict. As a consequence inventory became difficult to plan. Service levels became difficult to control, and this led to a significant impact on the manufacturing supply.
- Demand patterns became extremely uncertain very quickly. Retailers tried to cope with this by rationalizing products and starting to narrow their range. Instead of stocking 20 different types of toilet rolls, they might stock 10 and maximize the chance to be able to keep products on shelves. There was some rationale, but it’s also resulted in some other unexpected changes. For example, shopping trips have dropped, and online purchasing has increased exponentially.
- Competition will escalate. As product demand signals on certain products drop, companies will find themselves with excess inventory, often with a limited shelf life, and they will need to look at offloading that inventory. I’m sure we will see an increase in price variances and increased competitive activity, not necessarily on-pack promotions but certainly, trade-offs going on and those trade-offs will become more and more complex as people try to get their heads around where the demand signal is and where the supply is coming from.
- Expect land grabbing and market share grabbing. People will try now to maximize their supply capability and increase the probability of the maximum supply in the right place at the right time. Where do we go from here? What opportunities does this leave us with? It certainly gives us an opportunity to think about rapid reconfiguration and the willingness to reconsider the way we replenish and consider supplying and creating new portfolios of products to market at speed.
- Increased diversification. As a consequence of diversification, we will need to get better at identifying trends and changes in trends earlier. This will require a greater granular understanding of the data. It will certainly require a more adaptive consideration of where inventory is placed to protect customer service. Even though things will become more and more complex, there will certainly be the opportunity to continue to think about simplifying.
- Postponement strategies may change. The point of postponement may need to move and that might lead to a dynamic move in relation to different supply chain configurations with different rhythms and different policies being applied. When we consider supply, we need to be aware there will be scarcity, there will be limitations. Consequently, a key consideration will be where is the best place to position that inventory? Is it close to the customer? Is it at the point of supply? In reality, it’s probably going to be a mix.
- Forecasting is very difficult. What forecast are we going to drive this against? You will find people who will predict different returns to “normal.” Perhaps that’s a V shape, or perhaps it’s going to be a slow, phased increase in terms of the U-shaped return. Or maybe we’re going to have a double-dip as people come back to work and some companies struggle with cash flow and as a consequence, won’t be around in the future. The need to model scenarios at speed will be a key consideration to adapt to that new norm.
- Digital tools will be critical. This increase in data is going to require that we have tools for supply chain planners to analyze demand data and understand insights coming from artificial intelligence and machine learning. This means making important decisions about changing demand patterns, changing product mixes and the opportunity to leverage both capacity availability and leverage profitable opportunities. You need the capability of a digital twin to be able to model a scenario but then apply it to your supply chain quickly and effectively.
What does the future look like for you? Think about what risks there are for your own business and how you can create or modify planning processes to manage through this pandemic crisis and the following future uncertainty. S&OP is still valid because we still need to be considering our integrated end-to-end supply chain. What kind of tools are we going to use to help us to do that? What kind of inventory is available in our supply chain? What’s the quality of that inventory, where inventory has been paused or delayed? That will result in further variability and uncertainty in the quality of the inventory. All of these considerations taken together will influence how we successfully progress from here.