Supply Chain Darwinism in the Time of COVID-19
By Lou Arace |
May 28, 2020
May 28, 2020

The past few months have pressure-tested virtually every supply chain strategy on the planet, revealing existing weakness as well as new hurdles borne out of the pandemic. As organizations consider how to shift from survival mode into the new normal, they face the challenge of refocusing their already-stretched resources so they’ll have the most impact. We’ve uncovered five best practices that are building resilience into the supply chain and helping these organizations reemerge stronger and more durable.

Every day it seems like breaking news about COVID-19 or an about-face on current policies crop up, ready to decimate even the best-laid plans for those of us working in and around the supply chain. Most recently, we heard about plans to create a reshoring fund stocked with $25B to encourage U.S. companies to pull manufacturing out of China. The stated goal is to protect the integrity of the medical and food supply chains by making us less dependent on foreign influence. But naturally, news like this begs us to ask whether or not these new mandates will take root, what impact they’ll have on the supply chain, how soon we’ll feel that impact, and, more generally, how we should react when this type of uncertainty abounds.

Whether you attribute the quote to Charles Darwin or Billy Beane of Moneyball fame, “adapt or die” is not a bad idea to keep in the back of your mind in the current climate. But that does not mean it’s time to panic or make rash decisions about how to structure your supply chain moving forward.

What it does mean is that you must have a few hard-and-fast best practices that can help you reevaluate where you are now and reimagine a new path forward, regardless of the catastrophe du jour. This baseline will provide the gut-check you need when you’re presented with a new challenge that makes you sit back and say, “Are you kidding me?”

Adapt the Demand Planning Process to the New Reality

Adapting your demand planning to the new reality of the global pandemic may seem obvious on the surface, but there are a few less-obvious aspects that you should consider. Historical forecasting won’t work now, since, frankly, we’ve never faced something quite like this. It’s also (and always) a good time to be segmenting SKUs and demand patterns to get a more granular understanding of how the pandemic is affecting product availability.

Most importantly, you need to be closer to your customers to uncover real-time demand patterns. Start by asking yourself how close you really are to them now. If COVID-19 has shown us anything, it’s that most companies are not as in tune with customers as they think they are, and many are now assessing a new omnichannel strategy to minimize this gap going forward.

Reassess your Procurement and Sourcing Strategies

Make sure your procurement and sourcing functions have a balanced set of objectives. For instance, low-cost country sourcing (LCCS) may have been a best-fit option historically for an organization, but they could derail procurement goals and fill rates if those sources are no longer viable for a myriad of reasons surrounding the pandemic.

It’s time to move well beyond the purchase prices and start assessing total supply costs. The purchase price can be deceiving, so it’s important to understand the total supply costs when assessing procurement’s performance. Assess continuity of supply with all global suppliers, and if you are heavily sourced in China, consider developing alternatives like a China + 1 or beyond strategy.

Implement a Supply Chain Risk Index

Adopting a Supply Chain Risk Index can help you identify multi-dimensional challenges from one end of the supply chain to the other. An index can help you head off potential challenges before they happen, from natural disasters like a pandemic, compliance and regulatory concerns, and even the risks associated with third-party suppliers that could ding your own brand reputation by association.

Eliminate Waste and Supply Chain Blind Spots

“If only I had known” is not something you ever want to say, especially about your supply chain. Now is the time to map out your entire supply chain network—and make sure you go beyond tier-1 suppliers to include all manufacturing, distribution and support sites. Also, focus on streamlining your supply chain to get products faster by eliminating waste and building agility into the process. You may also have some blind spots that create additional risk because data and true visibility do not exist currently (your new Supply Chain Risk Index can help here).

Implement a Winning Scoreboard

The current state of the world requires us to focus on near-term goals and what success looks like over the next 30, 60 and 90 days. Related, you should put more stock in leading metrics like the number of items produced today or scheduled for next week, and less on lagging metrics and long-term goals. Break down what success looks like for every function and demonstrate how alignment will drive success.

Now more than ever, it’s important to ferret out and eliminate functional silos that lead to suboptimal performance. Make sure your winning scoreboard is aligned around minimizing total supply chain costs and risks while maximizing customer service performance.

With these best practices in mind, you can survive and thrive through most of the challenges thrown at your supply chain. We’re with you as you navigate through them, and to that end, let me know if you’d like to chat about how you can reemerge from the pandemic with a new model and path forward.