How should organizations deal with supply chain disruptions?

A dynamic situation like COVID-19 has been very disruptive to many organizations’ continuity of operations. The pandemic and subsequent lockdowns are a wake-up call to organizations that focus only on daily operational tasks as opposed to digitizing the business and developing a strategic long-term plan that considers potential future disruptions. While risk management planning was thought to be the answer, many companies found themselves short on responding to a disruption of COVID-19’s magnitude and global scale.

There are 3 areas that organizations need to focus on while dealing with natural or man-made disasters.

1) Recover by modifying operations to handle current needs and reduce potential loss

2) Adjust to the changes

3) Long Term Strategic Planning to build resilience into their organization to manage future disruptions

 

1) Recovery

Organizations need to quickly perform an in-depth analysis to identify available options against potential vulnerabilities and evaluate the trade-offs to handle disruptions in the supply chain. This typically requires about 1-2 weeks of work. Examples of Disruption Recovery Strategies are:

Disruptions and Recovery Strategies:

1. Loss or reduced capacity at a Distribution Center (DC):

a. Use alternate DCs resulting in additional costs at the new DCs

b. Build or order ahead leading to additional inventory costs

 

2. Transportation Rates Affected/Carrier Costs Spiked

a. Use alternate lanes/carriers/modes of transportation.

b. Optimize the building and routing of individual loads resulting in reduced miles.

 

2) Adjust to Change

Once the operations have been restored to handle the current disruption, the supply chain may need to be adjusted and redesigned to handle current business with the goal of balancing cost and service. Businesses may need to reassess not only their plans for the short term or current year but also look at a longer-term horizon.

This could lead to important business insights and additional revenue streams. As an example, a major foodservice distributor, who serves Restaurants, Schools/Universities (whose demand fell significantly by the lockdowns) as its major customers, modified its supply chain to support delivery to grocery stores, a segment severely hit with inventory shortages.

 

3) Long Term Planning against future disruptions

Develop a strategy to manage risks and a plan to deal with future disruptions. Supply chain innovations can be achieved by testing and optimizing hundreds of potential scenarios using advanced algorithms. Long term planning typically requires weeks/months of effort and should be evaluated throughout the fiscal year. Two initiatives are driving companies’ journey to resilience:

• Digital Twin:
Using the Digital Twin and Supply Chain Control Tower, it is possible to continuously examine the network against a myriad of scenarios to evaluate the different alternatives in planning for supply, demand and logistics changes by having complete end to end visibility across the entire ecosystem.

• Supply Chain Network Design:
Analyze scenarios that change with various demand, supply and operations constraints; evaluate the cost and service tradeoffs associated with the different scenarios and decisions to develop a set of recommendations that can be presented to cross function senior management along with the cost-benefit analysis.

 

Conclusion

The effect of the coronavirus pandemic on global supply chains is stunning and organizations need to quickly build resilience into their supply chains to support operating at full capacity to respond effectively to disruptions in-order to capture and maintain a competitive edge.

 

 

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