The spread of the COVID19, which has been declared a pandemic by WHO, is rapidly increasing. The number of persons already affected, associated deaths and the number of new cases being reported every day are quite staggering. And this, when we are quite some distance away from peak infections! To say that the situation is only going to worsen is a major understatement.
Businesses are already facing the brunt of this, what with major social and civic lockdowns and sharply diminished business operations. Supplies are being disrupted, dispatches are being postponed and employees forced to work from home. With medical experts forecasting that the pandemic is here to stay for a few more months at the very least, businesses need to respond quickly to this new normal.
In the current landscape, there are a few short to medium term issues for which businesses need to put quick actions in place.
- Visibility – With many organizations asking their employees to work from home or work in reduced team sizes, the importance of collaboration and visibility in supply chain operations was never as critical as it is today. Organizations need to ensure that the right metrics are being measured and tracked on near-real time basis. Clear analysis paths need to be defined to determine actions that need to be taken in case of deviations such that the decision-making process is not person dependent.
- Inventory realignment – With delays in supplies and postponements in dispatches, businesses need to take a fresh look at their inventory strategy and realign it with the current business environment. Re-defining inventory norms in line with the new demand volumes and redistributing inventory across plants, warehouses, hubs and retail centres may be an immediate necessity.
- Alternate Sourcing – China has been a major hub for raw material and component supplies for businesses across the world. However, with the onset of the corona virus pandemic (which incidentally started in China), supplies across the world have been severely disrupted. With lockdown expected to continue for few more days (even months maybe!), businesses need to relook at their sourcing strategies. Alternate vendors from different geographical locations need to be identified quickly, both from the short-term and long-term perspective.
- Network Restructuring – While businesses try to absorb the business impact of the corona virus pandemic, they must also realize that they need to de-risk their business (especially supply side!) by diversifying their operations across multiple geographies, with redundancies built in as required. This would mean re-defining the entire supply chain structure and operations or parts thereof and putting in place contingency plans to guard against future shocks. And it needs to be done now!
- Working Capital Optimization – With business slowing down, there are fears that the world economy may be heading towards another recession. Inventories are likely to pile up and collecting receivables may be tougher and may take longer. Businesses need to be pro-active and take steps that their working capital requirements are lean and efficient. The first step would be to assess working capital requirements and then make interventions to optimize.
The COVID19 pandemic is already having an impact on the way organizations do business and these changes are likely to stay. The organizations that realize this and take pre-emptive steps are the ones that are going to have a distinct competitive edge over their peers.
At Consus, we are well placed to help you navigate these tough times. Have a look at our services and feel free to reach us for a discussion on how we can work together.
About the author:
VP, Supply Chain Advisory