The Pandemic Will Create A Better Supply Chain

You might say that the COVID-19 pandemic is just another risk management event in a long list for supply chain leaders, but I would say not so fast. Three factors make this different: the length of time, the uncertainty of the recovery, and the lack of a new normal. Previously, in the world of supply chain, each risk management issue had an event, a response to the disruption and then the settling into a new normal. This is not the case for the pandemic. Instead, during this pandemic, the supply chain leader is managing a world much like a roller coaster ride facing disruption after disruption. Generalizations don’t apply. Each industry is different.

This pandemic will define a new age of supply chain management. The sweeping process changes to improve enterprise resiliency will improve the long-term management of global supply chain teams.

Riding the Rocky Elevator of Demand

In the words of one supply chain leader, “We are riding a rocky elevator of demand. It is either radically up or down. There are no gradual changes.” One automotive supplier stated, “A North American team runs our company. They are so focused on the local news cycles that they do not see the rise in automotive sales in China and South Korea. When COVID-19 first hit, the leadership team put the brakes on manufacturing and slashed inventories. They looked like heroes for the last earnings call, but now as sales escalate in Asia, we are working 24/7 on backorder strategies. We laid off critical workers in manufacturing that we cannot get back. Every day is a struggle.”

The shelves for paper towels and toilet paper are empty again. Consumers are pantry loading at historic levels in preparation for what they fear are more shutdown governmental action. Demand planning—the use of pattern recognition and optimization to detect and translate order patterns—is no longer adequate. Companies are managing demand by brute force with a focus on translating market signals—consumer sentiment, consumption data and rating/review feedback—within minimal latency. The organization is learning the hard way that order replenishment cycles across trading partners takes too much time putting the organization on the back foot. This awakening will fuel a redefinition of outside-in supply chain processes (those use market signals not just orders) to align organizations more quickly with market shifts.

The Quest for Enterprise Resiliency

Prior to the pandemic, the supply chain in most organizations was recognized as important, but not critical. Supply chain leaders lacked a seat at the boardroom table and projects to reduce complexity and improve enterprise resiliency were placed on the back burner. For example, in September, Campbell Soup
CPB
lost market share in the soup category despite an increase in sales in the fourth quarter from the prior year. The issue? Production constraints for their Swanson brand.

In October, Coca-Cola
KO
discontinued selling its iconic brand, Tab. Following the announcement that the US aluminum can market is short 10 billion cans, the Coca-Cola organization got serious about collaboration with major suppliers to reduce change-overs and simplify artwork. With COVID-19, platform rationalization, brand/item reduction, supplier development, inventory buffer design and global recipe standardization are essential to operation continuity.

Managing Work Teams

With the pandemic, there is a new appreciation of managing global teams. In our interviews, we find two trends:

1.     Reducing Global Complexity. With the travel lockdown, there is a renewed focus on standardized work processes and manufacturing simplification. As corporate jets quietly transport process experts to help align global operations, the R&D teams report working on ingredient standardization and process improvement. This focus will mitigate the risk of managing global operations which loomed large prior to the pandemic.

2.    Meeting Effectiveness. Most supply chain leaders are working from home using an assortment of online meeting platforms. While the supply chain leaders report missing person-to-person interaction, many report meeting improvement. While global online meetings happened before the pandemic, most of the workers were in a conference room at the corporate office with people from the international teams dialing in remotely. The conversations were unequal. As a result, the teams in the corporate conference room dominated the meeting. There is a heightened appreciation for online meeting effectiveness and work from home limitations. These will carry over post-pandemic work processes.

The Lessons of the Pandemic Will Create Better Supply Chain Processes

 The promise of the COVID-19 vaccine in 2021 and the return to work in the office lay before us, but the lessons learned during the pandemic form a foundation for building a better supply chain of the future. These awakenings will dramatically change supply chain processes.