COVID-19, the order of the Supply Chain

March-20: COVID-19 cases are on the rise, across the world. Offices announce work-from-home. Travels are restricted-domestic and international, the erstwhile distant-yet-connected continents are now geographic silos and the new life begins to adapt to the confines of home, mostly within the four walls. Stores are drying up and have become synonymous with Empty-Rack-Places-Wasting AC and Power. So is the case with the eCommerce services that have stopped promising deliveries or taking orders. Complete disruption or a reality check!

June-20 to Present: With wide variations in incidence and death rates, the pandemic had catastrophic effects on health and livelihoods worldwide. At the same time, the social distancing measures required to save millions of lives have triggered the most severe global recession on record since the Great Depression of the 1930s.Taking a quick look over the last 6 months, the impact of the pandemic could be attributed to the negative growth rates in the key sectors in India by GVA (Statista) from April to June 2020: -1.3% for Agriculture, Forestry, Fishing, -14.7% for Mining, -13.9% for Electricity & Utility services, -6.3% for Manufacturing and -9.7% to -17.3% for Services Industry. The global outlook was not positive with the virus leaving approximately 147M people unemployed, globally.

While, lately, there are some positive indicators of plateauing of the pandemic with India starting the vaccination drive by Jan 16 2021 (over 4 Million vaccinated by the first week of Feb-21), the Active Total & Daily cases coming down after the Sep-20 peak and the increasing doubling time (from 3 days in March-20 to 249 days in Dec-20), there is uncertainty about the direction, the duration, the magnitude and the impact of the pandemic with indications of economy contracting for some time in future. (Overall GDP growth projection for India in FY 2020-21: -7.7%, Agriculture: +3.4%, Industry: -9.6% & Services: -8.7%, Source: Economic Survey, Ministry of Finance, India)

Supply Chain Disruption:

The emergent waves of Covid-19 and the resultant disruption in operations had almost completely paralyzed the supply chains across industries. The disruption has forced organizations across industries and geographies to make a serious rethink on the way one anticipates the demand-horizon, plans for operations, plans for inventory, sources goods from suppliers, and plans for the supply-distribution to fulfill the customer needs at the desired speeds and achieve the desired inventory turns and be in existence. The outbreak and its aftermath have indeed highlighted how unprepared the world is, to effectively endure such global health threats, bringing the crippled-up state of the global supply chains to the fore of questions. Despite supply chain disruption inflicted by disasters in the last decade such as Japanese earthquakes, Thailand floods, Iceland volcanoes, etc., most of the companies still find themselves not ready for the outbreak. The supply chain indeed has shifted its role from being just one of the enablers for an organization to the primary determinant for the existence and growth of an organization. Especially given the current day long and complex supply chains, the stakes seem to have risen.

Things that could disrupt the business across most of the industries-

• Insane demand - Demand fluctuation creating an unsold FG inventory (demand lower than forecast) or stock-out (demand higher than forecast). Stock out is not good news as you have lost sales to your competition.
• Flow disruption - Dead or slow inventory towards the final stage of the process with no pull from the market due to new products, thus blocking cash and an associated opportunity cost.
• The Python-like Chain - Poor supply chain design causing excessive lead times and delays, which further triggers stock-piling of inventory as a natural precautionary move rising the total supply chain cost. The result is a bulky and lazy supply chain, slow to respond to the market changes. Operational-misalignment with the business strategy.
• Supply disruption - Poor spend-visibility and supplier market intelligence and sub-optimum pricing and leverage with more than sufficient suppliers in the system, across categories.
• Information fatigue - Inefficient digital footprint in the organization siloed systems, and the mess, data without insight.

FMEA - Failure Modes Effects Analysis, a concept mostly used in Quality and Design in the manufacturing industry, could be an apt tool to anticipate and review all possible modes (risks) of failure in the supply chain operations and could thus help the supply chain managers to revisit and improve the system on a continuous manner and be prepared for externalities. This process is best gone comprising of all sections of the chain to see the holistic picture, identify the problems or possible risks inherent in a particular section, and quantify the severity of the risks, probability of occurrence, and ease or difficulty in detection of such risks.

What Does It Take to Make Supply Chains Risk-Ready?
The imperative is to place sustainability and health at the heart of the economy. Sustainability: supply chain-wise or environment-wise. The current situation has indeed spurred creativity and searches for resiliency. How can companies devise risk management strategies to build such adaptable chains? Systematic categorization of risks and developing a related response strategy is key. How can that be achieved?

Map Risks to Predictability and Prioritize: A reactive risk-management approach must be taken for unpredictable risks and a more proactive approach for those with increased predictability. Hence, depending on the level of exposure, and the magnitude of impact, the companies can prioritize risks for targeted attention.

Realistic Final-Customer Demand: It is imperative to assess the demand signals received from the end customers to be able to react accordingly.

Integrating market intelligence into product-specific demand forecasting models could help organizations prepare effectively.

• A quicker response to inaccuracies and dynamic monitoring of forecasts is vital.
• Opening channels of communication with key customers, for an intricate analysis, will help.

Bring About More Transparency Into The Chains: Enterprises will need to gain visibility into their complete supply chain since most supply chains extend to tier-2,3 and often beyond that. Thus, looking at the source, suppliers, risk exposure, and the logistics systems, is recommended.

A decades-long focus on supply chain optimization to minimize costs, reduce inventories, and drive up asset utilization has removed buffers and flexibility to absorb disruptions and COVID-19 illustrates that many companies are not fully aware of the vulnerability of their supply chain relationships to global shocks.

Supply chains will need to move from good to better and an efficient and organic review will will help the system well oiled.

Exxoptimus's Exx-Plore practice could help organizations take a proactive, detailed, and end- to-end dive into the supply chain planning: procurement, manufacturing, storing, and distributing of goods/ service, take a re-jig, and make the required course correction before its beyond control.