For years supply chains have been built with efficiency and cost as the primary drivers resulting in significant growth in profitability. However, the resulting lack of operational flexibility and resiliency have led to an inability to handle major disruptions. This poses a major threat to many organizations. Currently, organizations are having to find ways to restore broken operations in the near-term, all while rethinking and redesigning supply chains to handle the future, not to mention the changes in demand from customers in this “new normal.”
The major disruption caused by COVID-19 has been unique; simultaneously impacting all elements of supply chains:
- Demand: policies and consumer behavior have created unpredictable demand. Some products experienced surges in demand, while others saw major drops.
- Supply: Global shutdowns created uncertainty about flow and stability with limited visibility to the flow of materials and unknown supplier scheduling. Delays are also not uncommon due to partial re-openings in certain industries.
- Operations: Production facilities experienced intermittent operations, low capacity, and shortages of products, labor, and material.
The main dilemma facing organizations in the near term is needing to restore operations to get cash flowing again and also needing cash to restore operations.
The COVID-19 crisis hasn’t just created new problems for organizations but has also magnified challenges that some supply chains have been struggling with for some time now. Some challenges include supply chains needing to evolve, supply chains being reactive and inflexible, and supply chains not being updated for over a decade.
At this point, we are starting to see varied policies on continued shutdowns and openings. Many organizations had expected more clarity on operating environments at this point. Instead, organizations are finding that there are currently more questions than answers. Even though many organizations lack critical information, organizations are feeling the necessity to re-open business. Despite the safety concerns that still exist, companies that have re-opened have implemented safety measures from mandating face coverings or transitioning to a touch-less model. As travel restrictions start to lift, the hotel industry is doing more with less: honoring regional social distancing guidelines by introducing technology to create a new guest journey centered around guest health.
This challenging environment will continue for the foreseeable future. To address this uncertainty, organizations should combine short-term responsiveness and long-term strategic thinking to build their survival plans. All organizations are doing what it takes to restore operations, but not all are in the same place of that journey. As such, a “one-size-fits-all” approach does not work; however, in all cases, organizations must be able to assess the state of their operations.
Here are three key factors to an organization’s success:
- Gain information where knowledge gaps exist: Assessing operations and making decisions requires information that organizations do not readily possess. In many situations, organizations rely on public health officials, and the information can be inconsistent or out of date. Organizations should engage in COVID-19 monitoring, allowing them to adapt in real-time.
- Ability to set directions, coordinate action, and move forward: Organizations must establish a cross-functional rapid-response team to manage and govern activity. This team should be supported by operational control towers, S&OP process activities, and supply chain and manufacturing
- Ability to work with greater uncertainty: The disruption caused by COVID-19 has created an increased environment of uncertainty. In response, organizations must establish scenario-planning capabilities to model near-term and long-term operations. This will enable them to model scenarios and better understand the impacts of today’s decisions.
Addressing these areas allows organizations to restore their operations and manage activities through uncertainty.
As organizations start to rethink capabilities to support their future operations, a critical element will be balancing supply chain flexibility with costs and services. Flexible supply chains allow organizations to mitigate risks by anticipating and addressing issues proactively, and quickly adapting to disruptions without significantly increasing operating costs.
A portfolio strategy is vital as organizations redesign and revolutionize their supply chain. Many organizations have implemented digital supply chain solutions, such as Vanguard Predictive Planning™.
With these actions, organizations will have the tools they need to address immediate issues and restore operations while positioning the supply chain where it needs to be: a critical component in this time of uncertainty, and a flexible and proactive operation for the future.