Since the pandemic began in early 2020, business has been facing the challenge of operating in the ‘new norm’. The need for a resilient and agile supply chain that can withstand aggressive fluctuations in demand, support improvements in cash-flow and provide better control and visibility of supply chain functions has never been greater.
Working with our clients, we have seen first-hand the effects of COVID-19 across multiple sectors. It is clear that companies who had previously implemented ‘agile’ have not suffered the effects of the pandemic as harshly. Their systems and tools have enabled them to make informed decisions about their supply chain, and adapt to rapidly changing demand and supply of parts and products.
Adopting digitalisation in the end-to-end supply chain
Before COVID-19, the adoption of new technology in the supply chain, with the goal of a more agile model, was driven by technological advances and Industry 4.0. Today it is driven by necessity, as a digital approach is seen as the means to gain control of supply chain functions whilst maintaining and improving service levels.
Multiple benefits result from adopting new technology and tools in the supply chain. These include; an increase in the efficiency of operations, increased accuracy of data extracted from the supply chain and the resulting ability to make better decisions.
Over the past year, we have seen many industries forced into adopting new types of technology in order to remain open. Many small high street retailers have adopted online ordering as their means of survival. This shift can put significant strain on the supply chain as it no longer caters to the needs of one location. Instead, it has to satisfy demand on a national/international scale which can open up supply and demand issues through the entire supply chain.
This puts pressure on the businesses’ service levels, as well as a strain on suppliers who may not have the resources to scale to significant increases in growth within such short timescales.
Deploying tools such as demand forecasting software into the value chain can significantly improve service levels, reduce cash tied up in stock and reduce obsolescence.
Building supply chain resilience
Building a resilient supply chain that caters to the requirement of future business goals is paramount to growth and success. TVS’ Procurement and Supply Chain Director, Rebecca Ryan, explains what is required:
“It takes a holistic approach to build a resilient supply chain, using a framework against which to map critical elements including demand, supply, geography and sustainability, considering risk mitigation whilst remaining agile to be able to respond to changes in any of these. This is driven through technology led data analytics providing artificial intelligence and machine learning outputs to aid effective decision making. The insight provided by these systems allows a business to plan and share information throughout the supply chain creating end to end visibility, which can be adapted as appropriate to ensure the surety of supply when and where required. The data collated enables the effectiveness of the plan to be measured and further enhanced. Strong supplier relationships and engagement provide clear data flow and engagement in responding to the immediate challenges that are faced”.
Within the functions that contribute to resilience of the supply chain, there are particular areas that drive significant transformation:
- Agile demand techniques
The ability to forecast demand accurately and secure provision for future requirements is a vital factor to building a resilient supply chain. No one could have predicted the scale and nature of the disruption that the pandemic has caused. However, companies with dedicated, dynamic demand forecast planning procedures will undoubtedly have experienced less downstream supply chain disruption.
Having these systems in place has not only helped in the short term, but also proved essential in adjusting demands and forecasts throughout the pandemic. There have been massive spikes in demand for products traditionally in supply abundance, which quickly became highly required products in short supply. Items such as hand sanitiser, masks, visors and other PPE products used to provide initial protection against the virus became highly sought after. This resulted in panic buying, shortage of supply and high rises in market pricing levels.
Robust supply chain relationships and effective, dynamic demand forecast planning procedures benefit cash flow by reducing cash tied up in unnecessary inventory. Other advantages are the prevention of excess stock and reduction of the risk of stock obsolescence.
- Collaborative supplier management
To achieve end-to-end supply chain visibility, it is essential to manage suppliers dynamically. Incorporating a Supplier Information Portal, such as Msys SIP, provides direct visibility of orders placed and allows accurate prediction of future demands. Suppliers are then required to notify their stock availability to match these future demand requirements. Orders can be expedited and potential stock shortages or supply shortfalls identified before any impact. This additional level of visibility allows a secondary supply source to be used if necessary, to protect the supply requirements.
The use of a SIP has proved pivotal during the COVID-19 period. It is a fundamental to maintaining high levels of stock availability and product continuity across a wide-ranging supplier base. TVS has been providing accurate demand forecast planning processes to our customers for many years. Work carried out in anticipation of Brexit delivered tangible benefits throughout the COVID-19 crisis. Meticulous contingency planning resilience work has now paid dividends for our clients. New supply sources were determined and significant stress testing and scenario planning increased supply chain resilience. Previously robust processes were ‘armour plated’, to further de-risk and mitigate supply disruption.
- Robust supply strategies
The inevitable supply chain disruption caused by the pandemic has created a scenario where it is increasingly important to have local, regional and national supply chain sources, as well as global ones. Businesses whose supply chain was robust before COVID-19 have reaped the benefits. Effective supply chain functions, built with high levels of transparency and long-standing collaborative relationships, are essential to success and fluidity within the supply chain.
It is crucial to understand fully which products are essential requirements for your business and manage their demand. Consider having primary and secondary sources and, in some cases, even tertiary and quaternary back-up suppliers to cover any eventuality.
The supply chains we manage are robust and flexible. This means that, throughout the pandemic, we have been able to maintain a continued supply of critical products with exacting specifications. Being flexible and able to shift supply sources quickly, has proved intrinsic to ensuring the security of supply. However, this can only be achieved when robust validation processes are in place. It remains essential to ensure that new suppliers are compliant and are validated before you buy, to guarantee product quality and protect the customer.
Creating cost transparency across the supply chain
As the pandemic continues, the resulting economic impact is still not fully understood. Organisations will be reviewing their spending and aiming to cut costs and reduce overheads wherever possible. It is imperative to have visibility and control of costs across the supply chain, and this can be done in a few ways.
A good starting point, when looking to reduce expenditure, is to perform an operational cost analysis. This gives a better understanding of which parts of the supply chain can be streamlined to operate on a more agile model. Other reviews can include procurement spend strategy, category management consideration and obsolescence management.
Possessing real-time data is invaluable to these analyses. It allows businesses to make better, more informed decisions. Adopting digital technology and analytics platforms will give you transparency of the supply chain functions. The end result is a more agile and maintainable review process, allowing informed decisions to be made, reviewed and adjusted as required.
Promoting a new way of operating
In summary, the challenges of this pandemic have accelerated the already active shift towards future resilience. Many companies are taking advantage of the current circumstances to develop a solution which increases the robustness of the supply chain.
Lessons learned will allow businesses to build back better than before, and create a supply chain network able to withstand any future serious disruption.