How To Optimize 3 Key Areas of Business for Supply Chain Success in 2020 Pandemic
This is a guest post by Derek Jones.
Toilet paper hardly makes the news. But save for handwash and hand sanitizer, no other commercial product better signifies the degree of anxiety the novel coronavirus has caused around the world. While the panic buying of toilet paper largely stemmed from an irrational fear, it had businesses thinking about how the COVID-19 pandemic disrupted interconnected local and global supply chains in 2020 and what they could do to mitigate the risk from these vulnerabilities. Global supply chains have been hit particularly hard given China’s critical position as the ‘world’s factory’.
Supply chains have always been a notable driver of a business’ competitive advantage. Now more than ever, a seamless supply chain is something every business needs in order to navigate the economic volatility. Resilience ensures your business saves cash, delivers faster, processes quicker, and stays on top of inventory thereby reducing decay and spoilage. Optimizing your business’s supply chain successfully in 2020 in the wake of COVID-19 comes down to your ability to sync and balance three things — employees, efficiency, and profit. Here’s how.
Educate Staff on COVID-19 Facts
Sick or quarantined staff are something you would want to avoid as much as possible. So before anything else, it’s in your business’s best interest to safeguard your people’s health and safety. It begins with educating both your own staff as well as your key suppliers on the coronavirus symptoms. The HR department should take the lead in helping employees who have known immunological vulnerability prepare for alternate working arrangements where possible.
Establish Screening Protocols
At the heart of COVID-19 management is preventive action, so as a business, establish and enforce precautionary measures. These should be supported by flexible policies for sick leave. Whereas COVID-19 shares symptoms with other health conditions such as the flu, common cold, and seasonal allergies, businesses must err on the side of caution for as long as the pandemic remains a present threat. It’s better to send an employee on sick leave and bear the lost productivity that comes with it than experience extended downtime due to the closure of an office or site following widespread infection.
Brace for Increased Absenteeism
Businesses must prepare for increased employee absenteeism. Federal, state, and local government containment policies may also contribute to labor interruptions, shortages, and absenteeism. These triggers may range from quarantine and self-isolation to travel restrictions and school closures that force parents to stay home with kids due to a lack of care options.
Reduce Non-Essential Travel and Promote Flexible Working
It took just a couple of months for the novel coronavirus, first detected in Wuhan, China, to spread around the world. The breathtaking speed of the virus spread can be attributed to just one thing — travel. Businesses should therefore restrict non-essential travel and provide flexible work opportunities. This would include remote work as well as non-regular onsite work hours.
Align Technology and Support with New Work Reality
As remote work policies take root, enterprise systems must be aligned with the new expectations. For example, the increased dependence on the internet for system connections has repercussions on network traffic, system stability, and data security. This would be an especially big issue if the business has employees or crucial suppliers in parts of the world where telecommunication infrastructure is of poor quality. Organizations must act fast to put in place the systems and technical support that ensure a seamless transition to remote and flexible work.
Develop Succession and Replacement Plans
Key staff within the company or along the supply chain may suddenly become unavailable for work either temporarily or permanently. But the show must go on. Businesses must have clear and well-thought-out succession and replacement plans.
It’s more than just identifying the individual who will take over a certain role when the current holder of that position is inaccessible. There’s also making sure the actions, procedures, and processes carried out by anyone in the organization are clearly documented and thus provide an easy-to-follow hand-over.
Deploy workforce management and scheduling tools that give you greater power in optimizing employee time and effort. Incorporate smart scheduling that allows you to change workforce requirements depending on changes in the supply chain. Schedule employee shifts in tandem with demand. Addressing and adapting to last minute staff changes will minimal disruption to your distribution. Allow workers to swap shifts with the most suitable team member.
Labor Planning for Work Resumption
Businesses cannot remain shut down indefinitely. Many countries are steadily lifting restrictions. Enterprises must plan for work resumption in an environment where there are still ongoing pandemic control and prevention measures. It’s certainly going to be a while before businesses return to full productivity.
A phased approach will be needed as market conditions perhaps won’t be ready for a full resumption from the get-go. So labor planning will be key in bringing in the right workers at the right time. In the midst of it all, the business should keep tabs on product quality as work continues with a less-than-optimal complement of workers.
Manage Critical Supplier Risk
Identity your business’s most critical suppliers and gauge their ability to satisfy your requirements and what risks they face from the pandemic. Obtain visibility on critical supplier production, inventory, and purchase order fulfillment. This is best done through already-running digital tools the supplier or your business would provide. Companies that don’t already have such electronic connectivity to supplier systems should expedite the development and deployment of dashboards that facilitate visibility and support decision making.
Understand the supplier’s ability to move production and order fulfillment to other less-impacted locations such as in the event of a government-ordered plant closure. And since you are unlikely to be their only customer, find out where you lie within their priority list in the event that capacity and inventory shortages prevent them from meeting customer demands. Proactive preemptive communication will be essential to minimizing the emergence or impact of supply chain problems.
Establish an open physical or virtual meeting space where you and empowered supply chain contacts can routinely convene to make quick decisions that maximize supply chain efficiency.
Activate Alternative Suppliers
Companies should move fast to activate alternative supplier relationships and quickly secure additional capacity and inventory. For international suppliers, it will be crucial that you identify alternative suppliers in a less-impacted region within the same country or in a different country altogether.
Evaluate and Secure Inbound/Outbound Logistics Alternatives
COVID-19 caused a drop in air freight capacity, a shortage of truck drivers, and substantial port congestion. This logistics logjam will take at least months to clear up. Businesses must work with their logistics partners to secure capacity. That could include exploring alternative routes to get the delivery to you. Sea-bound cargo could perhaps be transported via road and rail. In certain instances, the cost of a charter flight could be a viable, affordable alternative.
Protect Cash Flow
Countless businesses around the world have shut down, laid off staff, and sent many others on indefinite unpaid leave. All these are outcomes of cash flow challenges. Businesses that want to survive the economic storm caused by the pandemic must have a thorough plan for cash management. Pursuing collections and reducing aged receivables must be prioritized. Extending payables to increase cash holdings is also important.
Strategize and Synchronize Short-Term Demand-Supply
While businesses are bound to see a COVID-19 impact on both demand and supply, some will feel it harder on the supply than the demand side. Where demand falls dramatically, companies must quickly recallibrate their sales and operations plans. The best course of action in these instances when demand drops won’t be the same across the board.
For some businesses, especially those in a healthy financial position, it would make sense to build inventory, absorb fixed costs, keep operations running, and prepare for the market’s rebound. Others, however, should work on lowering production and making the requisite adjustments in tandem with market changes. Some companies may have to reduce prices in order to stimulate demand.
Whatever strategy you opt for, your business’s profitability must be at the center of it all.
Over the last 4 decades, supply chains have evolved to become global, complex, highly sophisticated, and central to business competitiveness. But their international, intertwined nature also means businesses are more vulnerable to a wider range of risks, some of which may be unfolding thousands of miles from the company’s primary place of business. There are many points of failure that are compounded by the lower capacity to rapidly accommodate disruptions and delays.
The drive to optimize supply chains in order to reduce inventories, minimize costs, and increase asset utilization has eliminated the buffers that were there before. COVID-19 has starkly demonstrated just how many organizations hadn’t fully understood their exposure to global shocks affecting supply chain relationships. Fortunately, by taking the right employee, efficiency and profit actions before, during, and after a pandemic like COVID-19, companies can realize world-class supply chain resilience and agility.
This is a guest post by Derek Jones.
Derek Jones (VP Enterprise Strategy, Americas)
Derek spearheads key initiatives at Deputy, a global workforce management platform for employee scheduling, timesheets, and communication. With a focus on healthcare, Derek helps business owners and workforce leaders simplify employment law compliance, keep labor cost in line, and build award-winning workplaces. Derek has over 16 years of experience in delivering data-driven sales and marketing strategies to SaaS companies like MarketSource and Griswold Home Care.