The Corona virus is rocking supply chains. It has become painfully clear that supply chains are global, long, highly connected, and extremely lean. Companies are responding to the effects of the Covid-19 disruption in various ways. In this blog we share some of the measures taken by our clients and draw some learnings.
Create supply chain visibility
This crisis makes it clear that supply chain visibility is of paramount importance. E2E planning systems allow companies to easily simulate the impact for different scenarios. At the Marcus Evans conference one of the presenters explained how Anaplan enables full transparency and allowed them to act in the right way when the production plant in China was closed due to Covid-19. For firms not having these systems the collection of all the data and the creation of dedicated dashboards helps in creating at least a basic view on global inventory availability, for example. One of our clients – a medical devices company – has launched a project to create a core dashboard of ‘Corona reports’, showing global product availability.
We see arrangements being made on three levels:
- Operationally to deal with immediate needs,
- Tactical to get insight and prepare for different scenarios, and
- strategically by rethinking supply chain design.
Operationally companies are creating dedicated Corona task forces to deal with uncertainties and to manage the consequences. Since events are unfolding with an amazing speed, day-to-day or even hourly follow up is required to observe, decide and act on events like product shortages, factory closure, closed borders or limited availability of transportation capacity. Based on new insights immediate actions are deployed. For one of our clients – a computer manufacturer – the production in China has started up after a lock-down of one month. The task force is dealing with questions like:
- Which products to produce?
- How to allocate the limited availability over the accounts (margin based)?
- What mode of transportation to use?
At the tactical level, scenario planning delivers understanding into potential issues and allows companies to pro-actively build business continuity plans. In our day-to-day customer engagements we see companies running scenario’s to answer what-if questions like:
- What is the impact when we have to close the factory in Northern Italy for a month?
- How sensitive is my demand forecast based on historical demand patterns?
- What to do when airfreight from China becomes scarce?
- Do we have 4th tier or 5th tier supplier that might run into problems?
- Do we have sufficient inventory when import into the US is prohibited for a specific period?
- Are triage rules clear and communicated in case a difficult supply choice has to be made so there is no time wasted in deployment of scarce supply?
In the aftermath of the interruption companies start strategic design studies on how to become more resilient to disruptions by having second sourcing, re-shoring activities or building networks with redundancy. Although this is not always an easy task due to high cost manufacturing like in the semiconductor industry or producing API in pharmaceutics.
We are happy to support you in these challenging times. Please feel free to reach out!