The Covid-19 pandemic tests the supply chain & manufacturing operations. In prior disruptions, such as an earthquake, volcano eruption, flood, and other unexpected events that occurred, the business then adjusted for a new normal. In the Covid-19 pandemic, the new normal is constant change. With the constant change started from January 2020 until the present date, the supply chain and manufacturing industry responds and adapts well to this crisis. The industry has learned a lot about the crisis and leverage its capabilities.
Business leaders and Supply Chain practitioners learned a lot and riding the waves of this disruption to gain the experience and validate their existing capabilities. For example, remote work, steps to reduce contact and prevent the risks of COVID-19, and border closures that lead to a re-look of how the new process, ways of working, adaptability, and the importance of business planning & supplier collaboration. All of these learning experience and new capabilities could determine the industry’s direction.
The new industry direction impacts many ways on how the supply chain and manufacturing industry works.
Safety has a new meaning
The new meaning of safety, now, it is not only reduced the process safety risks of in-person contact but also reduced the process and physical health risks that are inherent to manufacturing operations. It’s mandatory for many companies requiring on-site workers to implement daily temperature checks and daily COVID-19 testing, with at least one covid test per week for every worker and an established contact tracing system. The willingness to embrace a different way of thinking is successful. Now, many of the contactless safety protocols have become normal.
Planning - Build Better
A responsive supply chain planning model should be created. The model should be matched the cycle of the supply chain response with market expectations. To be clear, the model to trade-offs between cost, inventory, and service for individual products (SKUs) to transition from a traditional make-to-stock replenishment mode to a more flexible and advanced make-to-order approach while building capabilities along the way. This capability means building an S&OP cockpit to help the team guide scenario-based-decision. The cockpit model enables decision-makers to maximize revenue and margins while optimizing trade-offs on inventory and costs, improving the distribution-network strategy, routing based on demand hotspots, mitigation of short-term risks arising from demand-supply gaps for customer orders, improved forecast in on-time in-full performance (OTIF) as well as produces consistent balance sheet results in growth, margin, inventory turn, and Return on Invested Capital (ROIC).
Procurement- Growth Focus
Realistically, as an impact pandemic, the cost-saving target is lower than before. Some reasons like financial difficulties among suppliers, and major shifts in both demand and supply volumes. However, procurement still needs to be expected to examine new ways to create value. An approach to do exercise to find out hidden resources like remote work reduces demand for office space, organizations may choose to rethink their property strategies and recalibrate their real-estate cost baselines. Beyond cost, the procurement team and strategic supplier able to do collaborate, a program like a joint business innovation partner, with a focus on long-term goals to deliver value or innovation. Last, re-visit again about current technology that the organization has. The technology should help to identify new savings opportunities, deepen supply chain transparency, and enhance resilience at the same time facilitating more collaborative remote-working models.
Manufacturing - Restart the facility
Manufacturing has significant experience distribution from the pandemic, however, since the business restart, this sector needs to operate with a better solution. Some key areas that it needs to focus, like people, flexibility, automation/robotic, and sustainability. People will be on the ground to run the facilities, they need to feel safe to work. They need to feel contribute to the core manufacturing process as well. The business needs to customize what’s customers’ individual need, therefore manufacturing should respond well to this, including speed-up-to-market. Automation and robotics are definitely helping people on the floor to work faster, better quality, and improve productivity. Sustainability including reusing or recycling product components can both reduce environmental footprints, potentially cut costs, efficiency, and gains benefits from the entire product life cycle. Other examples, such as applying industry 4.0 tools like artificial intelligence and machine learning algorithms may provide more accurate insights to make a better decision.
Logistics - Shifted
The reality in this current situation is we need to deal with this pandemic and keep an eye on navigating this new landscape. Since the shut down of borders to trade and travel since COVID-19, businesses have shifted, at least temporarily, to sourcing and producing local goods. For logistics, this means there’s going to be an emphasis on more local shipping and movements. Another logistics approach is inventory management. Prior to 2020, many companies implement lean inventory. However, this pandemic tested the concept, and for some of the materials, the concept is not applicable. An approach like apply a calculated safety buffer and ensure better liquidity ratios to be valued for business resilience and sustainability. The calculated ratios need to be dynamic and validated along the year to anticipate lower suffered major setbacks on account of limited goods availability. Besides those two approaches, automation in logistics is critical to anticipate future conditions. The tracking and alerts in real-time digital tracking and route optimization for the safe and efficient movement of goods. Digital tools, like AI and IoT, are the best way to ensure that resources are used most effectively to get goods delivered fast, on time, and with as little expenditure as possible. Another example, apply ML in warehouse automatization. This implementation allows warehouse workers to focus on strategy and management.
In short, prior to 2020 many supply chain and manufacturing operations focus on optimization to minimize costs, reduce inventory and drive up asset utilization. However, the COVID - 19 illustrates that many organization is not ready yet to be more flexible and agile to absorb this disruption. At least until today, we never know when the pandemic is over, but the business should be restart immediately with a different approach to navigate the new landscape.