The ongoing public health crisis posed by Covid-19 has emerged as a once-in-a-generation pandemic, upending all aspects of routine life, including the way we conduct business. Most countries around the world remain under a state of lockdown with strict restrictions on the movement of goods and people alike, albeit to varying degrees. Consequently, the pandemic is proving to be an economic catastrophe, as much as it is a health crisis.
Over the course of just a few months, since it first emerged in Wuhan, China, Covid-19 has emerged as one of the great equalizers affecting all in its path, equally. However, the economic impact of the contagion does not seem to display the egalitarian tendency of the virus itself, with small and medium businesses poised to suffer much more than their larger counterparts.
Facing limited liquidity and enormous strains posed by overhead expenses in the current scenario, these businesses are in dire need of a quick fix to lift them out of the conundrum. In the short term, companies have recourse to a range of vital funding and cash flow programs announced by governments around the world, including the UK. While this may provide an essential conduit to much-needed cash reserves, these fire-fighting measures will not ensure long-term sustainability. In order to thrive in the long run and build adequate defenses against any such future event, companies need to plan and incorporate effective business strategies to mitigate future losses. One crucial business function of particular relevance to small and family owned enterprises is that of supply chain management. Currently squeezed at both ends of the demand-supply spectrum, such businesses can benefit greatly from a well-managed and responsive supply chain system.
Once the epidemic recedes and the global lockdown gives way to business as usual, such companies should commit some time and resources to revisit their supply chain management practices. By doing so, they will be able to alleviate the severity of any future unforeseen crisis. The following are some areas to delve into as part of any corrective exercise:
Supply Chain Mapping: A thorough mapping exercise will provide a much better visibility into the structure of your supply chain, giving you crucial information, within minutes of a potential disruption. You will know exactly which suppliers, sites, parts and products are at risk, allowing you to put yourself ahead in line to secure limited inventory and capacity at alternate sites.
Although the exercise can be time consuming and resource intensive, the dividends are worth the trouble. As a guideline, a common approach to initiate the process is to use the bill of materials and focus on key components. It commonly starts with the top five products by revenue and goes down to their component suppliers, and their suppliers, all the way down to raw materials suppliers. The result of a diligent supply-network mapping will equip organisations with the buffer to act proactively and make timely adjustments before the next crisis hits.
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Information Sharing & Risk Mitigation: Access to information and an increased visibility into the company’s supply chain helps build long-term resilience by minimizing risk and increasing the capacity to respond to unforeseen circumstances. In other words, from a supply chain perspective, the goal should be end-to-end traceability of each item as it moves through the system. At the moment, vital information is mostly siloed within each supply chain player’s organization, making it difficult to follow the ownership of each item across its lifecycle.
To remedy the situation, it is pertinent that you build a global, adaptive strategy, which tracks the multiple systems and touchpoints a product goes through. This will bring forth much-needed transparency, allowing you to adapt to shifting demand-supply patterns and to prevent working capital losses. For this to happen, business owners are advised to forge a culture of information sharing at all tiers in the supply chain network, develop standardized risk assessment and quantification tools and cultivate a trusted network of suppliers, customers and government officials focused on risk management. Easier said than done right? Not entirely, which brings us to our next point.
Paradigm Shift & New Technologies: In order to implement the strategies identified above, small and medium firms need to realign their approach to the design and delivery of supply chain systems. Once you do so, the tasks will not seem as gargantuan as they appear now. Traditionally, supply chain systems have been driven by products and processes and depended heavily on capital-intensive fixed assets. Future networks, however, will be driven by customer needs and competitive edge will be gained by continuously evolving to meet changing customer demand patterns. This is where technology comes in: as reliance on multiple streams of data grows, so will the need to harness these into actionable information by utilizing the relevant technologies and emerging platforms (such as advanced analytics).
Once the pandemic recedes, consumers will gradually revert to exercising the same control they have come to acquire over the years. Propelled by the revolution in mobile technology and connectivity, they will once again demand seamless and rapid fulfilment of demands. In order to remain at the forefront in the post-Covid 19 world, businesses will need to redesign elements of their supply-chain (from planning and manufacturing to inventory and fulfilment) to make the process consumer-centric, and utilize technology for quick dissemination of information. Businesses are indeed confronted with challenging circumstances with many of us caught off-guard, having to deal with a catastrophe of such magnitude for the first time in our lives. However, this time can be utilized to plan effectively for the post-Covid world by building adaptive and resilient supply chain networks based on transparency, collaboration and shared concerns. To sum up, going back to the drawing board is essential in order to increase profitability and dampen the impact of the next crisis, whichever form it takes.