The outbreak of COVID-19 has exposed the fragility of the global supply chain and, in turn, the organizational structures of many companies.
To understand why, it helps to look at supply chain management philosophy before the COVID-19 pandemic hit.
Pre-COVID-19 supply chain management
As firms aimed to work more effectively, save money and eliminate redundancies, most relied upon closely coupled, interdependent systems, stated Howard Yu, the LEGO professor of innovation and management in the International Institute for Management Development in Lausanne, Switzerland.
“In this kind of system, there’s not much idle and few buffers one of its components and, since we’re seeing today, little space to move if something goes badly awry,” Yu said. “Dependencies length vast geographical distances, and they may be particularly vulnerable to flaws in a different region of the series”
A quick pivot is the sole route from hurtling toward bankruptcy,” he said. The benefit of successful businesses is because of a very simple fact: They’ve altered their traditional business models quickly — literally overnight.
In the automobile sector, for example, producers — from Toyota from Japan into General Motors from the U.S. — all rely upon components in China, and also the industrywide focus on just-in-time delivery means that they do not carry much security stock, Yu explained.
In normal conditions, this system is very effective and successful, but nobody can construct a car with just 99 percent of its components, he explained.
By way of instance, if Hyundai first shuttered its assembly plants in South Korea in February, it was not due to the uncontrolled spread of COVID-19 from the nation, but since Hyundai could not maintain its plants available with no Chinese components, Yu explained.
“Within a rigid system populated by businesses run by the top down which are too slow to accommodate, those stations which prove efficient in times of calm are presently a source of acute disruption,” he explained.
4 critical inventory management strategies
The COVID-19 pandemic has supplied a lot of lessons, such as for all parts of the supply chain. Here are just four stock management approaches supply chain leaders and stock supervisors may use going forward.
1. Pay closer attention to consumer signals
Today’s leaders should pay more attention to the demands of customers than they have.
As the COVID-19 epidemic began, companies experienced a sudden shift in customer demand and channel preferences, said Suketu Gandhi, partner and global leader for digital supply chains in Kearney, in a consulting partnership.
He said that organizations that were not prepared were failing their customers. To avoid this, companies needed as much visibility as possible in their inventions.
“Your basic technique of inventory management [probability] was based on a [core] principle that said, ‘What happened yesterday is very likely to happen tomorrow,” Gandhi said. “When that rule was broken [due to COVID-19], everything ended.”
Companies successfully navigated it after the first initial setback and took their cues from the end customer.
Some e-commerce retailers are seeing a 250% increase in demand for such products, such as hand sanitizers, soaps and cold and flu medicine, Gandhi said. When it comes to these essential health needs, it is important to investigate at the inventory level, especially in areas where coronovirus cases are high.
In addition, companies should establish strong communication channels with their distribution networks so that they can share more accurate information to identify regional demand patterns.
However, businesses should question whether McKinsey & Company reports “supply-chain recovery in coronovirus time – the demand signal they are getting from their end customers in the short and medium term as planned for now and for the future” Is realistic. ” ”
“The demand planning team, using its industry experience and available analytical tools, must be able to obtain a reliable demand signal to determine the required supply – resulting in an integrated sales and operations planning process to be discussed and agreed upon, “The authors noted.
Also read: How Logistics Industry Developed in 2019 and Expectations in Upcoming Year
2. Focus on data
Because inventory management can be so complex, prioritizing data is an important inventory management strategy for virtually every company.
Take the example of Direct Relief, a non-profit, humanitarian aid organization based in Santa Barbara, California, that distributes life-saving medical resources to doctors and nurses worldwide for free.
Andrew Schroeder, vice president of research and analysis for Direct Relief, said that in the early days of The Covid-19 outbreak, Direct Relief’s business intelligence software provider, Qlik, helped to understand how it could help. is. Answer: Direct relief needed clear and clean data – and lots of it – so it could provide medical support where it was most needed.
Schroeder said that Relief regularly runs CoreBusiness Analytics in QlikView to operate its human storage and distribution system, Schroeder said. However, because of the COVID-19 pandemic, it is important for Direct Relief to link these operations to the ever-changing epidemiological information about the outbreak of the virus, risk factors, and its impact on medical infrastructure.
Therefore, Qlik developed a supply chain application to provide valuable insights into areas, counties, and personal health systems with a need for masks, gloves, gowns, intensive care unit medications and more.
Schroeder said the data analysis app, which has been updated in real-time, enables Direct Relief to continuously track the changing dynamics of COVID-19.
“[This app] brings epidemiological data and diagnostic capability information so that we can do contextual analysis around linkage in outbreak progress and risks at different locations, so that we can tie our shipment plan together. Sickness Shift Was happening, “he said.
Accurate data – properly selected and transformed into practical information – is one of the best weapons of direct relief against the epidemic, Schroeder said.
3. Diversify the supplier network
Organizations better prepared to withstand the outbreak of Convue-19 or any epidemic are those that are able to quickly find alternative suppliers to keep operations running. A management consulting firm in New York City.
The COVID-19 pandemic has caused organizations to think about investing in much more”elastic and resilient” supply chains — which is, supply chains which may withstand disruptions and regain operational capacities after disruptions happen — by incorporating additional sources of supply for critical items so that they could easily pivot to match changing market demand, he explained.
The lesson learned is that the businesses which have built-in levels of redundancy and are not just-in-time-optimized in regards to inventory are far better positioned to meet client demand, ” he explained.
By way of instance, if an organization’s providers are usually in East Asia and China, it is important to be able to check in other markets, including Vietnam, Singapore or Malaysia, to permit the enterprise to accommodate in the event of a worldwide pandemic, including COVID-19, as well as political or financial threat, Shrewsbury explained.
“Flexibility concerning the capacity to reposition or possess a nimble network which will enable organizations to respond appropriately is required,” Shrewsbury said.
“Even though cost and speed to function remain significant, supply chain flexibility and endurance have demonstrated to be crucial differentiators.”
Also read: How blockchain Perfect for the Supply Chain?
4. Focus on inventory accuracy
Another crucial inventory management approach is knowing what goods are available.
Throughout the COVID-19 pandemic, the precision and trustworthiness of a company’s stock levels are now exceedingly more significant, said Bernie Donachie, international supply chain lead to Protiviti Inc., a consulting company in Menlo Park, Calif.
“Knowing what you have — being exact about what you’ve — is vital, and where it is found is also significant because some establishments have dispersed stock in several places,” he explained. “You need to know what is in every of those warehouses, exactly how precise the documents are, whether individuals are upgrading inventory whenever they put something in or take out something.”
Organizations that do not have good stock management procedures and accessibility to exact numbers will probably find themselves unable to keep up with demand in certain categories or using an oversupply of things that clients are suddenly less curious about.