The Way Out of COVID-19 Lockdown.
Getting businesses up and running once the lockdown starts to be eased will not be straightforward. What are the basic questions that need to be asked and what additional thinking is needed to ensure supply chains are adapted for the new future?
The current COVID-19 lockdown has caused all companies to think about their supply chains. The stark reality of the Asian shutdowns has stopped the primary manufacture of components and finished goods.
Brands have been removed from the shelves and the companies selling them have temporarily shut. In some cases, not a bad thing as the retail outlets had closed as well. However, by-products go missing, the capacity of air and shipping routes decreases as ships are laid up and supply chains are fractured.
We have seen borders re-imposed in Europe and although freight is one of the things moving through, it cannot move completely freely. The level of HGV traffic on the M25 has declined substantially.
What should I be addressing first?
What are the questions that any Supply Chain strategist must ask?
Where are the real risks as we move forward?
The Prime Minister, Boris Johnson, has focussed on saving lives and protecting the NHS. Public health has been a priority.
Saving jobs and protecting the economy is the next challenge.
“Essential Businesses” have managed to push through whilst other businesses have felt the pain more intensely.
Each company will have its own unique set of problems to resolve and it’s clearly going to take a lot more than a couple of bottles of hand-sanitiser in the entrance lobby to resolve the spread of this disease any further. The challenges in care homes, restaurants, engineering plants and primary schools are clearly not the same.
- Is there going to be a phased start-up to the economy?
- What will happen to demand? Will the e-commerce boost accelerate the demise of the High Street or will people understand the other benefits from High Street shopping?
- Is Manufacture to be the first to restart?
- Is it offices next? And will Companies want to start-up offices quickly? Or will home working dramatically reduce the requirement for large office buildings? When offices do start back up, then the whole food supply chain to city centres will be needed at the same speed
- Will protectionism take over, will the US Trade Wars intensify?
- How will social distancing measures impact on a company’s ability to run at a profit?
- The environmental zones in London have been put on hold, will those come back quickly?
- So, what stocks do I hold going forward and where do I hold them? Are my stock files fractured due to lack of staff in the warehouse who were under enormous pressure?
- My current stocks, are they still saleable? What needs to be written off and destroyed, what needs to be sold in fire sales to catch the fast disappearing seasons?
- Have I lost any skills in my department and how do I replace them?
- When will social distancing be unravelled, who needs to be in the office? How do I manage a Retail Store in those circumstances, or ensure the speed of footfall through my sandwich outlet?
Businesses need to find the right answers to these and other conundrums in the coming weeks, as the lockdown restrictions are eased. Many of us have been through recessions and major supply chain disruptions before and utilising experienced resources and change management skills will help organisations react logically and quickly to the undoubted short-term challenges.
The way out of Covid-19 Lockdown. Alignment of Objectives.
Depending on the impact of COVID-19 on your existing business you may well need to develop a new business vision for the future, which will require a commitment to be mobilised across the whole of your business and communicated across the workforce.
It is essential, however, that any strategic changes are underpinned by shared and aligned business objectives. When diving out of a crisis such as COVID-19, it is so necessary to have real transparency of objectives, data and decision making across the company. Think about how you get the operating management to work closely together with clear objectives set by the Board, as this will ensure that the business team will be that much more effective.
Importance of the Supply Chain.
One clear priority in any post-COVID-19 business review must be consideration of the supply chain. How did it perform in the crisis? How appropriate is it to the post-COVID-19 future? What lessons have we learnt that need to be incorporated into a future design?
At one level and in one definition, the Supply Chain is the aggregation of all the channels used to get goods, packaging, ingredients, or subassemblies to a manufacturing plant then get the products to the warehouses for sale and distribution to customers whether these products come from your manufacturing unit, or a wholesaler or are simply purchases from another manufacturing plant.
In the new future, giving your supply chain more resilience, (when a disruption occurs), will require businesses to have full end to end control of their supply chain. This means integrated and aligned complementary processes.
It will be important that individual businesses functions do not optimise their own processes to the detriment of another. For example, manufacturing wants long runs for ‘lower costs’, which result in higher finished goods stocks and stock-outs at the same time. Procurement wants large purchases for ‘lower prices’ resulting in high component stocks. Distribution wants full lorries resulting in longer order-delivery times.
Working across the traditional organisational silos will help bring about an end to supply chain control. It will make businesses able to react more effectively, quicker and with better information and data.
It is not a deliberate set of actions by individuals that results in major inefficiencies in the supply chain. It is only when one can oversee the whole chain that real success is possible.
It is difficult to assess the risk of supply discontinuities, for whatever reason, and the company’s ability to react if a holistic picture of the company’s supply chain is not available.
In many companies, running the business as a joined-up set of supply-chain processes are already producing good benefits in terms of cost and efficiencies. Departments that were once ‘silos’, concentrating on their own goals and their external customers, are beginning to understand the effect that they have on the efficiency of other departments in the business. Supply Chain Directors help to keep the focus right down the chain.
Sales managers help with the forecasts and know that over-forecasting brings additional stocks with the problem of write-off or write-down of un-useable stocks for whatever reason. In the retail trade, merchandisers understand that over-ordering leads to greater volumes of ‘sale discount or markdown products.
Manufacturing managers are beginning to understand that over-production of one product leads to a counter-intuitive problem. You end up with higher warehouse stocks of what you do not want to sell now, yet lower stocks of what you do want to deliver as you are selling them.
Distribution has to deliver right first time, or the accounts department has to cope with invoicing problems or Sales have a disgruntled customer. That usually means that the money does not come in when it should.
At Bisham Consulting we have been assisting our clients in improving the efficiency of their supply chains for over 30 years. Covid-19 has presented a new set of challenges. No doubt Test and Trace, Coronavirus test kits, better public (and government awareness) will help us out of this one. That said, our Chief Medical Officers tell us more infectious diseases are highly likely in the future.
Have we learned the lessons from this one?
As practical operators, we understand that a structured and well thought through plan to eliminate inefficiencies in the supply chain can help us prepare. We know they can massively reduce costs. We also know that it can be done without compromising performance and customer service.
Bisham Consulting is staffed by consultants who have been senior managers/Directors in the logistics, manufacturing, and retail industries. We have all managed through recessions before and our backgrounds and experience mean that we quickly identify with client needs and that we deliver/implement practical solutions that are specific to the client’s business.
©Stephen Rinsler, April 2020
Bisham Consulting Office
Cedar House, Glade Road, Marlow SL7 1DQ
Tel: +44 (0)1628 487000