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 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, 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?
- 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?
- 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.
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 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 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 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 want long runs for ‘lower costs’, which result in higher finished goods stocks and stock outs at the same time. Procurement want large purchases for ‘lower prices’ resulting in high component stocks. Distribution want full lorries resulting in longer order-delivery times.
Working across the traditional organisational silos will help bring about an end to supply chain control and 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. Until one can oversee the whole chain, until one can bring together the various departments in collaborative meetings, until KPIs are written in an integrated way, where risk is analysed across the business 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 overproduction of one product leads to that counter-intuitive problem: 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. As practical operators we understand that a structured and well thought through plan to eliminate waste and inefficiencies in the supply chain can reduce costs 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
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