Written by Supply Chain Executive Mike Mortson. This guest post first appeared on Mike’s industry blog, Supply Chain Game Changer.
The Coronavirus pandemic has upended almost every aspect of our personal and business lives. And now we hear talk about this “new normal”.
The economic and personal turmoil has been unprecedented. But with uncertainty around the future spread of the Covid-19 virus and uncertainty about the arrival of some kind of vaccine there is increasingly talk of a new normal.
A new normal implies a significant change from our ways of living and doing business as compared to how we lived and worked before we heard of the Coronavirus.
What is this ‘new normal’ state?
And what is the new normal in Supply Chain?
Lockdowns have resulted in business closures, some temporary and some long term. People have lost their jobs, had their hours or pay cut back, or at best been required to work from home. Video conferencing with providers such as Zoom has become prevalent for both business and personal purposes. Airlines are largely grounded, trade and logistics have been curtailed, and travel of any kind over any distance has been highly restricted.
Commodity goods like toilet paper, flour, hand sanitizer and yeast have been in shortage as people panic bought basic goods in the face of the unknown implications of the pandemic. The very real problem of healthcare Personal Protective Equipment (PPE) and ventilator shortages has highlighted problems with National Strategic Stockpiles.
And the need for regular communication and updates from our Government leaders has caused us to hear our Presidents and Prime Ministers talk about Supply Chain, a phrase which those of us in the field never expected to hear from our political leaders.
For the foreseeable future we will all have to deal with, in some degree, the realities of lockdowns, social distancing, wearing masks, working from home, and more. And the potential for a second wave of the virus may result in any relaxed restrictions being withdrawn or severely curtailed.
What’s the New Normal in Supply Chain? (What’s Normal in Supply Chain Anyways?)
The massive disruption in the Supply Chain caused by the pandemic is historic by any measure. The visibility to and the impacts of this disruption is also unprecedented. Supply Chain professionals have had to react in heroic ways to get things back on track as quickly as possible.
But those of us who work in Supply Chain are not strangers to working in high intensity, high pressure, stressful and demanding situations. Part shortages, production stoppages, delivery challenges, cost and profit pressures, cash flow problems, quality issues, supply-demand gaps, and disasters of any kind are all problems that fall onto Supply Chain for resolution.
This is NORMAL in Supply Chain.
However it is clear that the pandemic has stretched and redefined even what Supply Chain leaders consider to be normal. So while we hear about the “New Normal” as it pertains in our personal and working lives, there are many aspects which can shape a “New Normal” for Supply Chain.
Here we outline many areas which we expect will form a New Normal in Supply Chain:
Many companies will be reconsidering their outsourcing strategies. In some cases they will want to outsource more and in other cases they will want to outsource less.
For several decades there has been a lot of outsourcing of manufacturing to low cost geographies. As the pandemic resulted in production facility closures in foreign countries there has been some sentiment to bring back this work into domestic locations. The reality however is that every country has been impacted to some degree so changing outsourcing plans will not prevent further impacts.
One area that should receive greater consideration for outsourcing is services, or as we like to say Supply Chain as a Service (SCaaS). Whether it be logistics, planning, procurement, or distribution for instance it may be more robust for companies to outsource some or all of these functions to firms that are industry experts in these areas.
2. Dual Sourcing
A clear problem highlighted by the pandemic is with single sourcing strategies. If you used raw materials or components that are only manufactured by a single supplier, with no alternates, any disruption with that supplier can immediately shut down your entire Supply Chain and your entire company.
We expect that more companies will be looking to establish multiple sources across every aspect of their Supply Chain, materials and suppliers to ensure that disruption in any one node will never bring their Supply Chain to its knees.
3. Automation Everywhere
When operations and business processes require human interaction to perform lockdowns and social distancing which stop humans from working also bring those operations to a halt.
Companies will need to invest in more automation to reduce their dependency on human operators. Typically the business cases for these investments do not factor in the extreme scenarios we have experienced with the pandemic, but they will need to in the future.
This type of automation should be considered in every function, not just robotics in manufacturing. Autonomous vehicles for delivery of goods can keep delivering even if people can’t drive the trucks. Processes requiring manual data entry, data collection, analysis must be replaced by sensors, big data, predictive analytics and artificial intelligence.
4. More Strategic Inventory Planning
Prior to the pandemic my only knowledge of Strategic National Stockpiles was in the context of oil and gold.
But as the projections for the spread of the coronavirus, and the resulting deaths, became alarmingly high the pending overwhelming load on our healthcare systems became apparent. This made real the fact that there would not be sufficient Personal Protective Equipment (PPE) (eg. masks, gowns) and Ventilators to handle the pending case load.
Many of these items were also in the Strategic National Stockpiles, but there was never enough to handle the requirements in the face of a full blown pandemic. Not only that but there was insufficient contingency planning to allow for the rapid expansion of manufacturing capacity of PPE to create enough supply and inventory to meet exponentially increased demand.
Aside from our healthcare needs most companies manufacturing other products did not have enough inventory of mission critical raw materials to withstand any extensive supply line disruptions. The focus on driving down inventory levels and increasing turnover, with no or insufficient safety stocks of critical items, has meant that the pandemic has wreaked havoc on supply of all kinds of goods.
Companies as well as governments will have to invest in selective and strategic raw materials and finished goods, even if it means carrying more inventory. Accompanied by a process of ensuring that these items are kept fresh and in regular rotation will ensure that goods do not become obsolete.
5. E-Commerce Channels Are No Longer Optional
As physical stores, restaurants and sales outlets have been closed during the pandemic many companies have lost all ability to sell their goods and services. Their channels have been shut off entirely.
On the contrary retail outlets that have an E-Commerce, or Online, shopping capability have in many cases flourished. With customers stuck at home unable to go to stores they have been ordering online with great enthusiasm. Even with extended delivery times, higher prices, and more frequent stock-outs the E-Commerce channel has continued on despite any social distancing and lockdown restrictions.
Some companies have figured out how to enable curb-side pickup, or fulfillment from within stores, which certainly has helped sustain some level of business. But in future companies must have an E-Commerce business solution to survive further disruption.
6. Don’t Touch Supply Chain Strategies Are Mandatory
We’ve written a lot about Don’t Touch Supply Chain Strategies. If you are a follower of Lean management philosophies you know that material handling activity is considered waste, even though it may be necessary, because it doesn’t add value to the product per se.
In far too many cases companies have Warehouses and Distribution Centres that are receiving goods, opening boxes, putting individual items on shelves and racking, counting those goods, picking them and packing them. All of this involves breaking down and opening cases sent from factories. This handling involves touching goods multiple times without adding value. It’s all a waste.
Social distancing and forced facility closures have further exposed the vulnerability of Supply Chains that operate in this manner. They come to a halt quite quickly.
A Don’t Touch strategy minimizes, if not eliminates, all unnecessary handling of goods. Drop shipping, full case fulfillment and replenishment, and optimized case sizes relative to demand are all strategies that minimize handling and allow for the uninterrupted movement of goods.
A Don’t Touch strategy must be the new normal in material handling.
7. Supply Chain Gets New Respect
For far too long many aspects of Supply Chain have been considered necessary but non-strategic back office functions. Purchasing, Warehouse operations, Distribution Centres, and more are often perceived as cost centres and necessary evils.
But if there is any possible positive to be taken from the pandemic it is that Supply Chain is a vital and strategic part of the success and survival of any company and any government. A lack of investment in Supply Chain people, processes, and resources has been proven fatal for many, both personally and in business.
Supply Chain deserves a seat at the Boardroom table, if not at the head of the table. Supply Chain leaders must be heard and they now have the platform on which to launch their strategic agenda for ensuring the future viability and success of their company and governments. And this all demands greater investments in Supply Chain recruiting and employee development.
8. Working from Home and Control Tower Proliferation
While there will continue to be a need for employees to be physically on hand for physical operations (eg. manufacturing, warehousing), more and more people will continue to work from home.
There are always advantages in face to face physical communication, but the pandemic has shown many people, including the disbelievers, that video conferencing and electronic communication can supplant the need for everyone to be in the office. This will continue in varying degrees after all of the pandemic restrictions are far behind us.
Online training, education and meetings will be prevalent unlike ever before. This will also provide a catalyst for the launch of control towers from which employees and managers can centrally monitor and manage operations in real time. Control tower enabled decision making will be faster, more responsive and more informed.
There are certainly challenges associated with working from home. Cyber security with personal equipment and unsecured networks will be a prime consideration. But these challenges are all surmountable, with the potential to create a better work-life balance, greater productivity, and happier employees.
9. Disaster Planning and Risk Mitigation Taken Seriously
For many people the task of inputting to and creating a Disaster Recovery plan is boring and comes along with a lot of groaning. It is a thankless administrative task that is usually filed in a drawer never to be seen again, until its time to clean out the drawer.
The pandemic however has clearly shown which companies have clear, well considered and rehearsed recover plans and which companies have put in no or little preparation for such eventualities.
Given the absolutely massive disruption cause to every business in every industry the necessity of robust Disaster Recovery plans is undeniable. Risk mitigation is a very real consideration in every day operations so taking it one step further to cover the possibility of global lockdowns and pandemics is now a reality.
10. The Digital Supply Chain is our Future
End to end connectivity of every node, every process, every participant, and all data and information is the core of the Digital Supply Chain. Enabled by technologies such as Cloud Computing, Big Data, Blockchain, the Internet of Things, Robotics, Predictive Analytics and more the Digital Supply Chain is the future.
In a Digital Supply Chain world there is real time visibility as to everything going on in every aspect of a Supply Chain. This visibility allows for real time analysis, decision making and responsiveness to whatever is going on.
As we know from the global pandemic experience the ability to react and respond with tangible actions is critical to mitigating impacts to people, businesses and the economy.
The Digital Supply Chain is the future and it is the single biggest overall weapon to improve our ability to manage any further disasters which may, and will, come our way.
The New Normal in Supply Chain
As conditions improve it will be tempting, and in many ways unavoidable, for people to go back to their old ways of living and working. Time has the ability to make people forget the absolutely devastating disruption the pandemic has wrought on all of us.
But it is also true that history repeats itself. If we do go back to our old ways and forget the lessons that we have learned from the pandemic, then we should expect even worse and more dire ramifications the next time this happens.
We must heed these lessons and not forget. And this knowledge must be used to inform a new way of being, both at home and and work. The visibility to Supply Chain’s role in the world has never been greater and we must lead the way to the future.
This new way of being will become our new normal, as long as we never forget.