Building resilience in supply chains

Lockdowns and no sale scenario has affected the cash flow and no one has any definitive view of how long this situation will prevail. It’s long-term consequences have yet to completely play out, Manish Ahuja, Director, Holisol Logistics shares the strategies that can be adopted during and immediately after COVID-19.

Given the size of the crisis and the rate at which it is evolving, developing a coherent supply chain in response to the COVID-19 outbreak is extremely challenging. Businesses need to respond on multiple fronts immediately and at an equivalent time they need to work to guard their employee safety while safeguarding their operational viability. Many businesses are ready to mobilise rapidly with a short-term focus, whereas this is the time when the supply chain leaders also plan to steel themselves against the medium and long terms effects and build resilience in their supply chains. It’s long-term consequences have yet to completely play out, the COVID-19 outbreak already provides some lessons about how we can better prepare our company to affect future large-scale crises.

How the epidemic can impact the supply chains?

This can impact the supply chain in several ways, be it material, labour, sourcing, logistics or consumers.  Materials: The restriction in movement of various means of transportation, due to complete or partial lockdowns will lead to the shortage of raw materials and finished goods routed through logistical hubs. Also, the confusion of what is essential and what is not, adds up to the shortage.
• Labour: Shortage of labour is visible as people are moving back to their villages to save themselves from paying rent and managing themselves without salary. This wasn’t envisaged as a part of the effect.
• Sourcing: With the travel restrictions and people being asked to work from home, finding new areas or vendors for sourcing as of now is going to be difficult.
• Logistics: Established hubs and supply networks may experience limitations in capacity and availability of transportation to move goods even if they are available. Finding alternative routes and means of transportation will become difficult.
• Consumers: Consumers would be more cautious in their purchasing habits due to the fear of being out and potentially exposed to the virus. This may lead to a shift towards online
sales channels.

What businesses can do now?
First of all, there is a need to rethink people practices. It’s going to be necessary to introduce or improve remote work policies, health & safety guidelines and hygiene practices for the protection of people. Next, accurate information may be a rare commodity in the early stages of this emerging disaster, therefore, it is very important to think critically and engage with industry experts who can help you build an empirical view for
decision making.

In multi-tier supply chains, it is important to establish an inventory of critical components, determine the origin of supply and identify alternative sources. Identify those that are sourced from high-risk areas and lack substitutes. We should even estimate available inventory along the worth chain, including spare parts and after-sales stock for using it as a bridge amid slow down in production to serve the customers. A crisis may increase or decrease demand for a specific product, assessing customer demand is important. The utilisation of AI will now be more prominent in improving the accuracy of forecasting.

The situation is very fluid; demand will change and there will be a shortage of manpower. It is time to revisit the processes and optimise your production and distribution capacities accordingly. Being flexible will enable businesses to respond better to any deviations or fluctuations. At this point of time, we should identify and secure logistics capacity. We should even run stress tests to know where supply chain issues will start to cause a financial impact so that we can manage cash and net capital. Expect the unexpected. AI-based technology solutions can help in simulating the variations and can provide actionable intelligence.

Lastly, create a comprehensive emergency operations centre. Most organisations today have some semblance of an emergency operations centre (EOC), but in our studies, we’ve observed that these EOCs tend to exist only at the company or business unit level. These centres need to be exercised now, more than ever.

What is the way forward?
The COVID-19 pandemic isn’t just a short-term crisis. It’s a long-lasting implication for the way people work and the way supply chains function. There’s a pressing need for businesses to create long-term resilience in their value chains for managing future challenges. This requires holistic approach to manage the availability chain.
It’s the time when companies must invest more in tech-based supply chain solutions, map their upstream supplier, revisit their business continuity plans, their procurement policy and the supply chain designs.
Nobody ever envisaged that this will ever happen to such a developed world. We feel from now on the strategies will change. Organisations will create a ‘risk management team’ which can check out the availability chain holistically and can move towards digitalising the entire chain to bring it into one platform.

• 94% of Fortune 1000 companies are seeing supply chain disruptions from COVID-19
• 75% of companies have had negative or strongly negative impact on their businesses
• 55% of companies decide to downgrade their growth outlooks (or have already done so)
*Source: Accenture