5 steps to a resilient supply chain
The COVID-19 crisis has shown a certain limit in the adaptability of the supply chain. While some companies were able to reinvent themselves quickly to survive in the midst of the crisis, others needed more time to put in place effective strategies to try to get out of the crisis.
If the implementation of a specific plan to get out of the crisis is a major element to succeed in recovering, in the future companies will have to have crisis plans established in advance and applicable from the beginning of the crisis to maintain their activities.
Are you struggling to get your business and your company back on track following COVID-19, and have had difficulty adapting to this sudden change in your business environment ? It is necessary for your supply chain to be prepared for the next crisis, to limit the damage and to be more reactive. Here are the 5 steps to put in place a plan to create a resilient, crisis-proof supply chain.
The first step of your crisis plan is to react at the operational level as soon as the crisis starts: you will have to focus your efforts on the management of out-of-stock situations and the continuity of order preparations. This is the first part of your plan : it initiates the actions that will allow you to resist the crisis in the short term.
To make your first decisions, those that will be the basis of your success in managing this crisis, you must start by setting up a crisis unit. Gather your collaborators, communicate with your partners in order to organize the reduction of your activities, which will allow you to concentrate on the essential activities.
To do this, you will have to re-evaluate the demand to organize a system of prioritization of orders. You will then be able to start the prevention and management of shortages, as well as the search for alternative technologies, which will allow you to manage this crisis safely.
To continue to implement your short-term crisis recovery plan, you will need to perform a detailed diagnosis of your supply chain, using internal data as well as data from your environment, which is essential in times of crisis.
With the help of the crisis team, you will be able to set up two action plans: a short term plan and a long term plan. For a quick recovery, you will have to identify and implement quick-wins. These small modifications in your systems and processes will allow you to obtain quick gains, and thus to get out of the crisis.
The water in a short time. In addition to these actions, it will be necessary to map the risks that still weigh on your Supply Chain, and in particular on your supplies. Here again, communication with your suppliers will be essential for a good management of your entire supply chain.
Do not forget to integrate your Working Capital Requirement (WCR) constraints in your analyses. As your environment is changing because of the crisis, you will inevitably observe deep changes in your customers' consumption habits. The crisis could have the consequence of slowing down the pace of your product purchases, increasing the delay between the disbursement (payment of products to your suppliers) and the collection (purchase of your products by your customers). You will then have to implement actions allowing you to limit the impacts linked to this sudden change in your WCR so that this change is only temporary, in order to recover quickly when the crisis ends.
During this stage you will have to start making decisions in a context that is still uncertain, to enable you to prepare a quick recovery and move towards a long-term recovery strategy. You will have to benefit from a global vision of your Supply Chain and its environment, in order to have multiple points of analysis that will allow you to make the best decisions.
Your action plan is now ready thanks to the complete diagnosis of your supply chain. You will be able to start its execution by quickly implementing quick-win actions, which will allow you to accelerate the recovery but also to secure your turnover, and thus limit losses.
You should therefore seize the opportunity to restart your supply chain and logistics activities in complete safety for your employees, keeping constant analyses, which will allow you to make quick changes in your new operating mode in case the situation should evolve causing new changes.
The exit of your Supply Chain from the crisis is now underway thanks to the implementation of your recovery action plan. You are entering the last two phases of your crisis plan, to prepare yourself to succeed in the long term.
To begin your exit from the crisis, you will need to review your plan to date to identify its strengths and weaknesses, which will allow you to improve your risk and crisis management. Also, the complete diagnosis of your supply chain and procurement will have brought to light new risks that you were not yet aware of. You will therefore have to conduct an in-depth reflection with all your departments in order to identify new risks to enable you to better anticipate future crises. You will thus be able to identify the action levers that worked during this crisis, in order to include them in your future crisis plans.
You have successfully emerged from the crisis, and you are now looking to adapt to the "New World" that it has left behind. New ways of consuming, detection of new failures in your processes, so many novelties which lead you to rethink entirely your logistic schemes and models.
For an agile Supply Chain, the best way to go is digital. Indeed, digitizing your stocks and flows allows you to have a global view on their status and the activities related to them. This will allow you to bring more resilience and proximity in your processes, in a logic of constant improvement of your performance.
You will have to keep on diagnosing your Supply Chain, not only to enable you to gain in performance, a positive point for your company, but also to keep on detecting failures in your processes that could weaken your company in case of a new crisis.
In order to help you in the diagnosis of your Supply Chain and the construction of your action plan to get out of the crisis, here are 5 points of improvement to implement within your company :
The global visibility on your Supply Chain management gives you access to your supply and sales data in real time, for a better anticipation of risks and demand in general. With this system in place, you can make decisions with a large amount of information at your disposal to ensure you are making the best decisions for your business.
To obtain this global visibility, you will need to equip yourself with software that is capable of interfacing with other solutions, in order to allow information sharing internally and with your environment (notably your suppliers) to obtain better visibility and anticipation.
Redesigning your processes will allow you to optimize them to reduce or even eliminate your "reaction time", which is disabling for your company: it immobilizes all your operations in the event of a crisis for the time it takes to set up a new action plan.
This overhaul will certainly require time from you and your employees, but it will allow you to stop wasting time during future crises.
The main task will be to optimize your inventories: you will have to find the balance between your WCR and your safety stock in order to eliminate unnecessary and costly overstocks, while ensuring the continuity of your activities. You will need to rely on big data and machine learning to obtain all the information necessary to calculate this WCR/safety stock balance.
The crisis has certainly occurred at a time when you wanted to create new projects for your company. A shadow now hangs over the realization of these projects which are no longer priorities for you in the face of the crisis. You will then have to put an end to all or part of these projects in order to recover the financial resources you will need to relaunch your business.
The best decision to make will be to put your projects on hold or to rethink them entirely in order to save money, rather than cutting the budget on small parts of the project without considering the whole subject. Indeed, these small changes could end up creating problems that will cost you more in the end.
A major flaw in the logistics system was highlighted during the COVID-19 crisis: its vulnerability due to its dependence on suppliers. Your priority will therefore be to make your supply chain resilient by increasing its autonomy. You will have to choose new suppliers, this time local ones, while multiplying them to have several means to supply you in case of crisis. Similarly for your products, you will have to multiply the references in stock to ensure that you always have products available in case of customer orders, even in times of crisis.
When a risk is considered low within a company (there is little chance that it will occur), the importance given to it is very low, if not zero. There is therefore no crisis management plan assigned to it even though its impact can be very strong and its consequences dramatic for your company.
You will therefore have to establish a risk culture within your company, by defining the probability of occurrence of each risk in a qualitative and quantitative way, while trying to foresee the impact that it could have on your company, and what level of tolerance you have to bear it. You will be able to use crisis simulation processes in order to be better prepared. This study will allow you to better prioritize and prepare for risks while becoming aware of their existence and consequences.
In the event of a crisis, your information system will prove to be your best ally thanks to the amount of data it is able to offer you. It will allow you to quickly make well thought-out decisions with known consequences. It will be it is also a precious help in setting up your forecasts and simulations in order to make them more accurate. You will therefore be better prepared for the next crisis that could occur and weaken your Supply Chain.
Monstock is the solution that allows you to optimize, digitalize and automate your business processes. Face the upheaval of the supply chain with an omnichannel solution and able to follow you from end to end whatever your sector.
For more information: contact the Monstock team.