The Covid-19 crisis has dramatically changed the way companies around the world are managing their business. The pandemic has exposed many vulnerabilities in supply chains and opportunities for others. The attention for supply chain planning has never been bigger. Our experts have identified five key areas to focus on in 2021, helping leaders to adapt and optimize their supply chains for the new reality.
1. Re-instate statistical forecasting
The key assumption for statistical forecasting that “the past is a good predictor for the future” doesn’t hold anymore, which presents a new challenge in forecasting and demand management: Can we still generate a meaningful statistical forecast in our planning system, if past demand patterns are heavily disrupted? The answer is yes, and here are two methods how:
This technique consciously fills plummeted sales gaps in the disrupted period to recover the demand pattern. It can also be used in case sales peaked exceptionally. However, the resulting statistical forecast might not be fully usable if it is expected that demand will again behave in a disrupted way in the future. To still generate a proper baseline in this case, that only needs limited manual enrichment, another method is available in our toolkit:
The Rubber Duck
This method applies future ‘disruption and recovery curves’ on the right aggregation level (e.g. country-product family), to reflect expected demand disruption throughout the selected portfolio scope.
2. Optimize your working capital
Companies today are facing tremendous inventory challenges, balancing between controlling the stocks and maintaining their customer service levels; demand patterns have changed both up and down; inventory levels were based on the past stable situation. It is vitally important to bring focus and create a plan to cope with the challenges. What can you as a company do first to get the fast-working results without costly long-time efforts?
The answer is simple – create insights in your main inventory, service level, and cost drivers. It is impossible to optimize your parameters without knowing the as-is situation. Use the insights to define the most effective prevention and counter measures. As a next step, restore supply chain balance and enhance the quick wins with smart analytics. Only then start regularly updating your inventory parameters based on the latest trends in demand and supply, leveraging the knowledge of the planners. Monitor the progress and the results to keep your settings optimized for the future.
3. Use your IBP process to manage the dynamics
Current business reality has taught us that being able to deal with dynamics is pivotal to be successful. A well-functioning IBP process is critical to reducing the latency in responding to events happening in the market and allows you to make high-quality decisions. IBP is a cross-functional business process involving finance, sales, marketing, and supply chain. Situations change fast. Grab new opportunities and have an agile response to the unexpected.
Bring your IBP process to its full potential and keep evolving in line with business needs. How to get started:
- Assess & benchmark your current maturity
- Design & implement a fit for purpose IBP process
- Coach stakeholders on various levels in the organization
4. Re-design your supply chain
Global supply chains with single sourcing have become a common set-up for competitive reasons over the last decades for many companies. Three main forces drive reconsideration of this set-up and the need to re-assess your supply chain configuration:
- The Covid crisis, with lockdowns, the closing of markets shows the vulnerability of global set-ups.
- The growing politicization and uncertainty in free trade require more resilient supply chains.
- The need to consider the environmental impact of the current supply chains. In the circular economy, shorter supply chains with integrated return flows are more sustainable.
Supply chain redesign starts with translating the business strategy into supply chain requirements. Consider building a digital model of the as-is supply chain (“digital twin”). This can be used for the optimization and evaluation of scenarios on various criteria like costs, service, environmental impact, and risks. Uncertainty asks for more frequent evaluation of the supply chain configuration. Leverage the developed digital supply chain model and build your capability.
5. Accelerate the digital transformation
Digital technologies have changed our personal lives via WhatsApp, Instagram, Airbnb, Uber, and Spotify. This change has also a large impact on your value chain. Considerable investments are being made to enable the digital transformation in the planning domain, companies are taking big steps towards increasing the level of automation of their planning processes. Getting digital holds the promise of efficiency of tasks that once required substantial time and human effort. It also involves improving the quality of forecasts, plans, and decisions through mining large amounts of data to discover new insights that were previously inaccessible.
Advancements need to be made in collecting and engineering data, implementing new tools that allow for more advanced analytics, preparing your organization, and building a data-driven culture. Start with developing a vision, select a business process to work on, and take it from there by running projects to explore benefits and learn data science tools that go beyond the existing planning tools, build capabilities, KPIs and data.
Readjust your planning and forecasting to a post-pandemic world, start by getting in touch with our experts!