The Pandemic Imperative: Embracing the New Normal via Supply Network Transformation

ABSTRACT

The COVID-19 crisis is changing the business landscape, probably forever.  Crises of this magnitude are Darwinian in nature. Only those who balance the required tactical and strategic action successfully will thrive as we emerge from the lock downs.  In fact, many view the crisis as a chance to embrace a “New Beginning”. This is an opportunity to realign to the expected, most probable scenario via effective Supply Network Transformation.

 

PREFACE

Without a doubt, the pandemic is more than a “Black Swan” event. Never have we responded to a health crisis by intentionally shutting down global commerce disrupting economies and supply chains.

For some Healthcare, Life Sciences and CPG / Grocery clients, a significant increase in Demand is coupled with Supply side constraints.  Simulations, supply constraints and customer allocation and/or fair share rules are applicable.

For other Industry verticals (e.g., Automotive, Chemicals, and Hospitality), a drop in both Demand and Supply also drive the need for strong scenario simulation and optimization.

Extreme Demand and Supply disruption, in both frequency and magnitude, creates the need for immediate tactical action typical of crisis management. The short-term tactical focus must be balanced with the medium to longer term strategic view to the “New Beginning” transformation to a Resilient Enterprise.

The pandemic has delivered short and long term changes to the way we all do business.  For many, this represents an opportunity to confront the crisis with a positive bias for growth.  In fact, this “New Beginning” enables the business to prepare and seize the opportunity while competitors are distracted.  This short term focus must be aligned with strategic transformational action tied to Best Case, Worst Case and Most Probable Case business scenarios and simulation.

 

TOP THREE STEPS TO MANAGING THE CRISIS

In times of crisis, the Pareto principle of focusing on the vital few versus the trivial many is most applicable.  In other words, prioritization of strategic and tactical initiatives is key.

STEP 1: In any crisis of this magnitude, Job One is to maximize Liquidity /Cash Flow associated with the vertical drop in Demand.  Your Financial Team will review its short-term cash flow needs and assess the need for incremental funding, if applicable.

STEP 2:  Once the urgency of liquidity is addressed, the next step is to provide your best Demand Forecast for the three Scenarios below.  This is where your Supply Chain Leadership Task Force members join forces to reach consensus on the contents of the Table 1 below.

STEP 3: The third step is to understand the Short- and Long-Term actions required to manage the challenge and align with the new constraints imposed by the crisis.

The objective of this effort is to drive towards a consensus “Most Probable” business scenario that will define the requirements for supply network resiliency and profitability. Based on the requirements and prioritization, a roadmap to transform to a Resilient Enterprise can be adopted and executed.

TABLE I: Scenario Planning identifies the resiliency required to be enabled by Supply Network Transformation

 

 

SUMMARY AND CONCLUSIONS

Management skills are challenged when the extraordinary disruption triggered by the pandemic rendering current “Business Playbooks” temporarily obsolete.

This crisis is an opportunity to excel by overcoming the challenges of this pandemic. Your leadership team’s superior scenario planning skills and tools can assist the enterprise with short term needs and poise for significant upside in the foreseeable future.  To quote Louis Pasteur, “Luck (Chance) favors the prepared mind”. The pandemic crisis provides an opportunity to embrace the most probable scenario as the path forward to resiliency in the future.  Companies that embrace the “New Beginning” will be enabled by sustainable, adaptable Supply Network / Ecosystem transformation.

 

 

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