Is your supply chain ready for disruption?
Blog: Capgemini CTO Blog
With recent events currently impacting day-to-day life across the globe, no country or business is immune to the disruption that coronavirus (COVID-19) continues to cause across the globe. Disruptions from pandemics represent a very high risk to human life, and force business leaders to make important, rapid decisions to protect and support the health and safety of their people, while trying to minimize disruption to the continuity of their business operations.
For some organizations, such economic repercussions have the potential to be extremely severe, especially given the extent of their global footprints and the complexity of their multi-tiered, global supply chains. Business leaders need to continuously analyze and assess the situation to rapidly adjust the optimization of their operations and monitor ongoing operating capability to adapt their supply chains and protect their employees.
The need for global coordination
The majority of Fortune 1000 companies are experiencing supply chain disruption caused by the fallout from coronavirus (COVID-19), and they have seen a negative impact on the business that has resulted in a downgrade in their growth outlook.
While there are similarities to previous recessions caused by the liquidity crunch from the fall of Lehman Brothers in 2008 and natural disasters such floods and tsunamis, coronavirus is unique in the fact that it is impacting almost every part of the globe. This means supply chain disruption doesn’t occur in single instances (for which there is a comparably easier remedy), but that supply chain leaders need to manage a major global exception situation.
In the short-term, the supply chain needs to adjust to the immediate challenge, and in the long run supply chains will never be the same. There is a need for global coordination to help organizations redefine their supply chain capabilities to create and maintain a rapid response and flexibility – creating intelligent supply ecosystems. This will enable organizations to mitigate the risks, protect the functioning of global supply chains, and reduce or minimize the disruptions, while also adapting to a “new normal.”
Lessons from the past
To help companies plan, prioritize, and respond during supply chain disruptions, the following recommendations will not only help the immediate near to mid-term challenges, but also assist with long-term planning and recovery efforts:
- Employee safety – ensure health is a paramount concern. Prepare and adjust to new ways of working for business continuity (e.g., work from home – availability of tools and technology for efficient working, travel restrictions, etc.)
- Command Center (war room) – establish a center to assess the current and ongoing situation for governance and processes, be a single point for all information updates, create alignment across different business units/entities and stakeholders, and develop risk and response management, and contingency planning
- Financial implications – review and protect the financial stability of both the organization and the entire ecosystem (vendors/suppliers, customers, contract manufacturers, distribution/retail)
- Supply chain impact analysis – identify the impact on the end-to-end supply chain, including:
- Analyzing sourcing restraints such as supplier financial support, lead-time management, alternative suppliers, make vs. buy, and insourcing, etc.
- Analyzing the impact of manufacturing on the global supply chain and internal operations to assess whether internal networks can be leveraged to shift volumes in order to meet supply and predictive asset management. For example, the US automotive industry is repurposing and retooling to manufacture medical ventilators
- Focusing more on dynamic demand planning (demand challenged with rapidly declining demand or is it demand rich with ample new demand) as historic order patterns become insufficient to run the supply chain given high demand and supply volatility
- Leveraging Sales & Operations Planning to coordinate the entire value chain
- Anticipating and planning for the “Bullwhip Effect” during different stages as the demand error can amplify and the signal become distorted
- Modifying warehousing operations to reduce handoffs and identify or assess the need for additional capacity for high demand products
- Modifying replenishment strategies for effective distribution and allocation or even rationing to help maximize the yield from scarce resources and to set expectations for service levels. For example, medical gloves and masks allocated to first responders vs. retailers
- Expediting mitigation strategies and actions.
Actively managing these key levers will keep you strong through the crisis and enable you to thrive when the crisis passes.
The way forward
The current disruption from coronavirus (COVID-19) has the potential to have long-lasting implications on supply chain function and workforce. Organizations can no longer assume that the old response plans will keep the business running in the face of unprecedented changes. There is a need to organize a proactive and holistic response looking into end-to-end exposure, associated risk, and operations management capability for all the critical functions.
Build resilience and flexibility in value chains to manage future challenges. Focus on digitization and implementing technology platforms that support applied analytics, artificial intelligence (AI), machine learning, and robotic process automation (RPA), while providing end-to-end visibility to identify, assess, and mitigate risk across the business, partners, and suppliers.
Be data driven. Leverage data and analytics to run “what if” dynamic scenarios to make timely adjustments to help prioritize your supply chain challenges and risks, and their implications on the execution of your supply chain planning, optimizing for employee experience and thereby customer experience.
The need to become an orchestrator on an intelligent supply ecosystem is even greater in order to address the challenges and stabilize. These are unprecedented circumstances, where best practices and lessons learned from previous crises can offer a good structure and foundation to build a successful and resilient response.
Many thanks to Phil Davies (Vice President, Capgemini Invent) and Jörg Junghanns (Vice President, Europe – Digital Supply Chain, Capgemini’s Business Services) for their input into this article.
Learn more about how Capgemini’s Digital Supply Chain offering can assist with navigating the immediate challenges caused by coronavirus (COVID-19) and help you create a resilient responsive, adaptable, and intelligent supply chain.
To learn more about how Capgemini’s Digital Supply Chain Practice puts your customers at the very center of our solution, opening your channels to new, innovative business models that can lead to increased revenue, profitability, and working capital, as well as enhanced customer satisfaction, contact: nilesh.b.kulkarni@capgemini.com
Nilesh Kulkarni leads the Digital Supply Chain Solutions team for North America. He is an accomplished supply chain operations and change management leader, with over 14 years of experience in leading strategy and transformation initiatives.
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