For weeks, the COVID-19 epidemic has been in the front headlines, catching the eye of many companies as they consider the effects on their supply chains and the world economy as a whole. Within just a couple months, this new coronavirus has caused supply chain disruptions for nearly 75% of U.S. companies.(2) With this “Black Swan” event finding vulnerabilities isn’t a matter of if but how much. Re-thinking new supply chain planning strategies will ultimately result in the transformation of entire supply chain models. While the impact of COVID-19 is still largely unknown, following are some tools to consider while managing supply chains during this crisis.
Improve Supply Chain Visibility
Other than the employee safety of employees, the most immediate and main focus should be to improve supply chain network visibility from raw materials to end product. Managing supply chain challenges requires real time information exchange between facilities, direct suppliers, and beyond. This kind of visibility will not only require better communication channels with suppliers, but also a more digitized approach. With the rise of technologies such as cloud computing, 5G, and IoT, many companies are resorting to Digital Supply Networks (DSN) and leaving behind the traditional linear supply chain model. DSNs increase end-to-end visibility in supply chain networks resulting in more resilient networks allowing them to quickly adjust and recover from unexpected disruptions.
Supply Chain Risk Management and Business Contingency Plans
This is where all “What-If” scenarios come into play. In a time with so much uncertainty, it’s important to discuss all the best and worst-case scenarios and the necessary action plans for each one. Imagine how different a contingency plan would look if the crisis were to pass in 1 month compared to 6 months. Also consider hiring an Asia supply chain consultant to assist in contingency planning. Be sure also to begin identifying China manufacturing alternatives to mitigate risk. This includes alternative modes of transportation and logistics. To build a strong supply chain network in the long-term, avoid only considering cost when choosing a supplier. Be sure to maximize supply chain flexibility wherever possible while keeping quality control in mind. Maximizing flexibility should be a key factor in building a resilient supply chain.
Inventory and Short-Term Demand-Supply Synchronization Strategy
Besides facing disruptions from the China supply chain and manufacturing side, also expect big shifts in consumer behavior as demand for certain products begin to skyrocket while others fall. Oftentimes, supply chain inefficiencies are hidden with excessive inventory. Some companies choose to keep high inventory levels vs Just-In-Time (JIT) strategy and minimal inventory. During disruptions, companies with JIT strategy tend to be affected the most and inefficiencies in supply chain are exposed. It’s important to re-visit inventory planning during crisis. Building inventory for a potential rebound may be something to consider. With an increasing number of countries forcing quarantine, the entire transportation model is at risk.
Employee Wellness and Education
Expect education on symptoms and prevention of future pandemics to become a permanent trend. Temperature checks and routine daily monitoring as well as strict hygiene practices and social distancing will become default SOPs. Health records identifying at risk individuals may become more scrutinized.
Develop an Infrastructure for Remote Work
We may be witnessing the biggest work-from home experiment in human history. This crisis has the potential to accelerate what may have been the inevitable: a mass telecommuting movement. While unexpected, this is a good time to align necessary IT systems to smoothly support work force transitions from office to at home with as little impact in productivity as possible. Companies will begin acquiring and analyzing data around planning, communicating and infrastructure as an entirely new workflow dynamic is in the making.
Evy Pinero is a research assistant with Baysource Global and currently pursuing a Masters of International Business at Tsinghua University in Beijing.