COVID-19 Supply Chain Resources & Recovery Strategies
How to Sharpen Your Digital Strategy
Ongoing investment in the right digital technologies is a necessary part of delivering resilient supply chain networks and preserving long-term business viability. Here are a few emerging practices to consider as you prepare your post-COVID-19 digital strategy.
1. Speed can help overcome uncertainty. During the pandemic, speed has become a critical value proposition. For example, with less capacity available, shippers are looking to quickly lock in reasonable rates to guarantee fulfillment. Prioritizing digital tools, such as AI-based instant quoting services, is one way brokers have begun to shift strategies.
Think about where increased efficiency can help employees and customers interact seamlessly. By identifying specific tasks that can be streamlined through automated methods, businesses can adopt sustainable technology practices that deliver powerful benefits.
2. Keep your eye on the bigger picture. Reacting with agility to supply chain disruptions requires a flexible ecosystem that can adjust in real time to keep up with fluctuating capacity.
But supply chain leaders can't calibrate their networks to avoid these disruptions without visibility to data insights and partner capacity. Management solutions that offer real-time data across the entire supply chain have become a life preserver for many operations during the pandemic—and they will become the expectation post-COVID.
Investing in new ways to harness machine learning and blockchain technologies to capture relevant data and develop prescriptive insights can help companies navigate disruptions.
3. Digital innovation doesn't stop when COVID ends. Building a culture that advances digital solutions starts at the top—and requires buy-in at every level. Identify individuals in your organization who can champion the right technologies and facilitate their implementation. Additionally, tap into consultants who can provide an outside assessment of your existing tools and introduce powerful, new ideas.
The more businesses seek out new ways to address points of friction, the more prepared they will be to face whatever unexpected disruptions may lie ahead.
—Albert Lee, CTO, Odyssey Logistics & Technology
Rethinking Supplier Risk Management
To minimize the chances of supply chain disruptions in the future, dive deeper into your suppliers' business resilience capabilities by examining three areas:
1. Sustaining long-term business disruptions. Instead of just understanding if suppliers have a plan in place to withstand disruptions, you must also ascertain how long they can withstand disruptions. Make sure their disruption response strategies can sustain business operations for 60, 90, or more days.
2. Internal and external concentration risk. Apply concentration risk analysis to all resources within your organization as well as your supply chain. This includes workforce, workplaces, all forms of third-party relationships, and even data centers. Lowering concentration risk should be a top priority, and that can mean diversifying your supply chain.
3. Enhanced focus on disaster recovery. Traditionally, information security questions have been the main focal point of many technology-focused risk surveys and on-site investigations. That's changing.
Manufacturers now realize they need to know more about their suppliers' disaster recovery (DR) programs, including testing, to be comfortable in their ability to respond to a wide variety of technology disruptions.
COVID-19 has forced organizations to rethink their supply chain strategies, focusing more on DR and business continuity.
—John Beattie, Principal Consultant, Sungard Availability Services (Sungard AS)
Importing Tips for Small Businesses
Here are six best practices to follow as you begin to re-engage in trade and manage through uncertainty in the global supply chain.
1. Digitize your freight bookings. Businesses that adopt digital freight management are best positioned to weather supply chain disruptions for one critical reason: data. Natively digital platforms provide complete transparency on pricing and flow of goods from end to end, which puts the control of cross-border shipping back in your hands.
2. Stay in touch with the market. Continually gauge the market so you are able to make late-breaking decisions. Conventional wisdom about how to get the best price or how to manage risk frequently does not apply under current conditions. But the good news is, insight about the changing freight market is more available than ever.
3. Pay attention to per-unit profitability. Now is not the time to focus on overall and general inventory. Instead, take a more granular look into inventory turns. Look at items on a profit rather than a holistic basis. Pay particular mind to in-demand items and per-unit profitability. Focusing on the demand side, prioritize more pragmatic areas, such as home consumables or medical and protective equipment, or areas that have predictive prices associated with them, and de-emphasize luxury products that are less likely to sell right now.
4. Ship early and stick to the ocean, if possible. In China and Southeast Asia, factory suppliers are returning to normal capacities, and raw materials are ready to ship. If you ship by air or ocean, book your shipment one or two weeks prior to the cargo date to lock in prices and help buffer any pending supply issues.
Ocean is still less volatile than air, so rely on it as much as you can. If you do need to ship by air in small quantities, consider express airfreight services because they don't contract with other logistics companies, and therefore have more end-to-end control.
5. Try to avoid importing heavily inspected goods. To avoid unexpected and potentially large price increases as a result of delays, be mindful of goods that are heavily inspected and subject to government regulations and customs inspections.
6. Diversify where you're shipping to. Major distribution warehouse services are beginning to accept only essential supplies and limit suppliers. As a result, you should explore alternative fulfillment options—such as third-party fulfillment companies, your own warehouse if you have one, or even your own residential address—to mitigate logistical risks and optimize scheduling certainty.
—Jamin Dick, Head of North American Supply Chain, Alibaba.com
How to Build Resilient and Responsible Supply Chains
Companies can reset their supply chains to increase both resilience and responsibility by focusing on these priorities:
- Preserve the extended workforce: COVID-19 has put both the core and extended supply chain workforce in an unfamiliar, fast-changing, and stressful environment. Leaders must ensure the health and well-being of supply chain workers by supporting their physical safety and mental health needs.
- Repurpose your capabilities: Businesses have a vital role to play in helping societies manage the COVID-19 crisis. Leaders should look for ways to repurpose supply chains to help societies manage the urgent challenges of COVID-19.
- Think local: Businesses can help societies both directly, by supporting immediate healthcare needs, and indirectly, by supporting local communities. Leaders should think creatively about how to reallocate resources to support local communities across the whole supply chain.
- Secure the supply base: Recent supply-side challenges highlight the need for a deeper understanding of both known and unknown risks to the supply base. They also amplify the importance of predictive modeling and applied intelligence. Leaders should strengthen the security of supply networks to enhance overall resilience and support areas of the supply base at risk from operational and/or financial disruption.
- Respond with insight: Today's digital platforms, analytics, and automation capabilities enable supply chain leaders to quickly get visibility across the supply chain and respond to COVID-19 with speed, certainty, and safety. Companies should use analytics, automation, digital platforms, and digital twins to model disruption and test potential responses.
- Learn and evolve: This crisis is an opportunity for businesses to uncover previously hidden weaknesses in their supply chains and ensure they come through stronger than before. Leaders can capitalize on a once-in-a-generation opportunity to identify points of supply chain failure, their root causes, and how they can be strengthened.
- Design for the long term: Businesses have a unique opportunity to create intelligent supply chains with a redoubled focus on agility, resilience, social responsibility, and human-centric needs. They'll also need to plan for future disruptions, which require liquidity in the short term. By partnering with the finance function in cash preservation interventions, supply chain leaders can help reset costs and resources from a zero base.
—Mark George, Managing Director, Accenture Strategy
Developing Lean Resilience
A supply chain that is too resilient leads to prohibitive cost levels; one that is too lean adds a high level of vulnerability. To reach lean resilience, develop these two skills:
1. The ability to audit new business decisions on demand: by the lane, by the transporter, by the channel, and by the mode of transport.
2. The ability to quickly establish service level agreements (SLAs) based on understood lane performance and parameters.
These capabilities allow companies to ensure their supply chains are cost-effective, able to scale up or down, and agile enough to respond to the new normal, which is characterized by:
- Shifting supply chain partner landscape. Some existing partners are shuttering and new partners are emerging. Quick supplier assessments and 24/7 supplier monitoring are the new supply chain management standard.
- Consumption patterns trending toward omnichannel solutions. Online services, particularly e-commerce, are the winners of the current crisis. The partner ecosystem needs to be re-organized, creating demand for new shipping lanes and new SLAs.
- Accelerated planning through supply chain signals. Planning cycles of 13 weeks are not much help during highly volatile times. Reducing this to a horizon of 10-15 days requires real-time and reliable supply and demand data.
—Wolfgang Lehmacher, Supply Chain and Technology Strategist, Board Member, Roambee
—Sanjay Sharma, CEO, Roambee
Insider Tip: Take a Load Off
While full container loads (FCLs) are normally the most efficient way to ship large volumes of products, many shippers have trouble getting their FCLs to leave port because of the changes brought on by COVID-19.
Instead of waiting on FCLs, it's time to consider using less than container loads (LCLs).
Shared consolidation programs can spread out FCLs into several LCLs. These LCLs are packed with products from other suppliers that are going to the same location. Because of this, your business doesn't spend as much money as it would sending an LCL with just your suppliers' goods.
This means that you can send small amounts of shipments over a longer period of time, instead of waiting until a port has enough capacity to load your FCLs. The destination starts receiving products, and the supply chain starts to move along.
—Gary Cardenas, President, TOC Logistics
"A combination of securing more localized supply chain networks, a willingness to be agile in the face of disruption, and the fearless adoption of new technologies will ultimately help shippers to be more resilient amid a changing global landscape."
—Lior Sion, CTO and Founder, Bringg
Rethinking E-commerce Fulfillment
Micro-fulfillment—a budding idea and an interesting experiment in pre-COVID times—has graduated to a serious fulfillment expansion strategy for retailers adapting to the new normal.
Post-pandemic, retailers are answering a resounding wake-up call to rethink fulfillment strategies and retool their existing space with automation technologies that can scale up and down and pivot across channels.
Micro-fulfillment gives retailers control of the e-commerce experience by assembling smaller-scale fulfillment facilities near or in retail locations to leverage inventory close to consumers.
Some retailers might choose to decrease "front-of-store" space to increase "back-of-store" capacity to service both in-store sales and local e-commerce sales. Others might opt to repurpose low foot-traffic retail locations to dedicated hyper-local e-commerce fulfillment. Still others might adapt empty urban space.
Any of these strategies can offer home delivery as well as buy-online-pick-up-at-curb or in-store options. Utilizing micro-fulfillment centers (MFCs) in high-density population centers can speed delivery at lower costs with inventory curated to local buying patterns.
MFCs can enable high-capacity, high-efficiency fulfillment at a lower cost-per-order with automation that reduces human touchpoints. It also uses machine learning to identify real-time demand patterns, orchestrate order flows, and optimize inventory storage strategy.
The main drivers in the business case for MFCs are employee and customer safety, fulfillment speed, and order execution costs and margins. Online customer satisfaction and retention also support this model.
Assessing MFCs' impact on the broader supply chain is imperative to defining the right micro-fulfillment strategy. Analyze factors impacting costs and ROI, such as which products to carry in which MFCs, which locations should serve which customer segments, which structural options and automation solutions to choose, and which delivery and pick-up options to offer.
Flexible and portable solution strategies that can be modified based on seasonal demand or even moved to a new location overnight can maximize your returns.
Rethinking fulfillment to future-proof supply chains is a mandate for retailer survival. Micro-fulfillment can let you flex to meet online order demand and immediate delivery expectations.
—Jeff Cashman, SVP and Chief Operations Officer, GreyOrange
3 Ways to Strengthen Global Supply Chains
How can global supply chains move toward recovery while continuing to deal with uncertainties on both the demand and supply sides? Take these three steps to adapt to the new normal:
1. Build the resources to reroute and identify alternate sources of supply quickly. This requires supply chain and procurement professionals to automate manual processes, eliminate unnecessary barriers, and adopt a data-driven mindset. By breaking down internal silos and implementing AI-powered technology that collects and processes data from across the organization, decision-makers can act in real time and pivot supply as necessary.
2. Modify payment agreements. Businesses need consistent cash flow to sustain their operations—especially in times of economic uncertainty. As such, suppliers are heavily reliant on the flexibility of their customers to collaborate on payment terms. Too often, large payments have longer payment cycles, and can be delayed by up to 90 days.
The practice of dynamic discounting gives buyers more flexibility to choose how and when to pay suppliers in exchange for a lower price. It's beneficial for both parties: The buyer can use excess cash to generate a discount and the seller gets paid earlier.
In the context of the current crisis, dynamic discounting enables businesses to improve liquidity and support financially struggling business partners when they need it most. It makes sense—a large, multi-billion-dollar buyer would likely be willing to pay a smaller supplier earlier in exchange for a discount—especially if it means that supplier will be able to keep their business afloat.
3. Gather real-time feedback. Active listening, visibility, and collaboration between buyers and suppliers is key to optimizing supply chains. Procurement leaders need visibility into the health of their suppliers during the time of crisis. Are they able to meet demand? What do they need? Seamless communication with suppliers will help keep supply chains intact.
Supply chain leaders should consider implementing regular surveys or questionnaires that help buyers understand the operational status of their suppliers in real-time, allowing them to be more efficient in how they manage risk and disruption.
—Sean Thompson, EVP, Business Network and Ecosystem, SAP Procurement Solutions
Logistics Lexicon for Recovery
Apparel retailers put off selling stockpiled inventory for another season or even year to avoid post-pandemic discounting.
Expanding fulfillment from retail stores, in addition to traditional fulfillment channels, to speed delivery to customers.
An invoice payment system where carriers choose certain payments to accelerate while de-prioritizing others, offered by U.S. Bank, a payments processor and lender to the trucking industry.
Corporate-owned, personally enabled policy for mobile devices to allow warehouse operators and delivery companies to quickly scale up workforce numbers.
E-commerce fulfillment spaces usually attached to brick-and-mortar stores and featuring manual order picking and packing. Coined by Stop & Shop.
Replacing third-party-supplied parts with components designed in house to cut costs by eliminating a supply chain link.
Fully automating distribution processes to eliminate human touchpoints. Coined by Boston Scientific. A key component is an automatic solution for printing and attaching packlists to shipping boxes.
How Digital Twins Improve Supply Chain Agility
Digital twins are proving to be critical tools for many manufacturers in the process industries. They help organizations keep supply chain operations running as nimbly and efficiently as possible by offering the following advantages:
- Keep employees safe while maintaining essential operations. By adding parameters related to using alternating lines/equipment on various days of the week to their digital twin, companies can use the tool to help maintain social distancing. The scheduling optimization model works around constraints and ensures personnel scheduled to work in a section of the manufacturing facility have safe distances from staff working on other lines/equipment.
- Run profit optimization scenarios. Digital twins allow companies to run and evaluate "what if" scenarios with any combination of supply/demand assumptions to optimize their end-to-end supply chain.
- Align demand, capacity, supply, and operations execution daily. Companies that employ scheduling optimization digital twins can adapt to uncertainty and modify plans on the fly. They can continuously adjust demand, supply, capacity, and operations execution.
- Monitor demand and market signals for signs of recovery. Companies can employ demand management digital twins in support of sales and operations execution weekly meetings to spot changes in demand trends.
- Maintain forward visibility to understand logistics requirements. Planning and scheduling digital twins can guide short-term decision-making on capacity needs. This can help manufacturers ensure they get the overseas ship and route they want.
- Perform scenario analysis to manage uncertainty. Recovery will likely not happen uniformly within a country or around the world. It will most likely occur locally in certain countries or specific regions within a country. Digital twins will continue to play a central role in support of monthly sales and operations planning by charting the best course of action to take amid evolving supply/demand recovery scenarios.
—Roch Gauthier, Sr Director, Product Management, AspenTech
Top 3 Questions to Ask When Onboarding New Suppliers
For U.S. manufacturers shifting to alternative suppliers, especially for medical supplies, doing so safely requires asking key questions to assess supplier risk across financial health, ethics, and business continuity preparedness:
1. Do you have the working capital necessary to remain viable over the contract period with our company? Knowing a supplier's financial health before engagement is critical. If they do have the working capital and crises occur like today's environment, the key is to engage in regular, candid communication to ensure they have the operational and working capital support they need. Early payment programs or supply chain financing can support businesses that are cash-strapped during points of the relationship.
2. Do you have a documented and tested InfoSec continuity plan? A comprehensive InfoSec continuity plan will be a requirement for outside vendors. It's important to understand whether a new supplier has prevention and recovery strategies in place when it comes to cyber threats. For example, cybercrime complaints like business email compromise (BEC) have risen 200-300% during COVID-19.
The most common misconception about BEC scams is that the threat is limited to direct attacks on your own email environment. However, supplier email environments can get compromised, allowing bad actors to divert supplier payments to their accounts. In 2019, a Toyota parts supplier suffered a major BEC attack, losing $37 million to cybercriminals. You can anticipate this type of large-scale payment fraud when suppliers lack advanced security controls.
3. Are any key employees or senior management members of your organization a government or public official? As a result of increased instability in many regions of the world during the coronavirus pandemic, companies should be on high alert for geopolitical fraud in their supply chains. Fraudulent transactions often correlate with countries that score high on the global Corruption Perception Index. With all suppliers, companies need to validate that they are not on any prohibited party list (e.g. OFAC, FBI) at onboarding and continuously during the relationship. Penalties for working with sanctioned entities not only include hefty fines, but it could also lead to jail time.
—Danny Thompson SVP, Market & Product Strategy, apexanalytix