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Covid-19 : Supply Chain Matters slide deck
- 1. COVID-19: SUPPLY CHAIN MATTERS Daniel Muir Supply Chain Scotland April 16th, 2020
- 2. CONTENT Supply Chain Risk Resilience Responding to the Crisis Future strategy
- 3. INTRODUCTION The Covid-19 crisis has thrown the importance – and vulnerability – of Supply Chains into focus Started with concerns about the impact of shutdowns in Chinese factories on global automotive supply chains Quickly moved on to the impact of panic buying / hoarding on grocery market in UK and around the world Concerns about workforce isolation / sickness on manufacturing output Impact of lockdown on UK hospitality and tourism businesses and their suppliers Spread across many sectors as non-essential business halted
- 4. INTRODUCTION Even large, global supply chains have shown themselves to be vulnerable Supplier failures where production shut down in other parts of the world Logistics challenges as borders were closed Little buffer stock held across supply chain so any interruption causes impact quickly Volatile demand impact on normally stable items “Bullwhip effect” amplifies demand back upstream causing shortages Relatively small overall demand increases can lead to stock-outs in retailers
- 5. SUPPLY CHAIN RISK Like any risk assessment: Risk = Probability x Severity of Impact We can’t usually eliminate risk but we can mitigate it
- 6. SUPPLY CHAIN RISK External (D) Consumers Customers Logistics providers Internal Sales Team & C S Planning Production Warehouse & Despatch External (S) Suppliers [and upstream supply chain]
- 7. SUPPLY CHAIN RISK - EXTERNAL Demand (Customer) side – Extreme Demand Volatility Increase or Decrease Very difficult to predict Changes in range / route to market Customer Pressure Logistics Service
- 8. SUPPLY CHAIN RISK - EXTERNAL Supplier side - Failure to Supply Unable to produce (staffing / shutdown) Raw materials further up chain Logistics challenges Competition for resources
- 9. SUPPLY CHAIN RISK - INTERNAL Staff shortages (illness/furlough/lockdown) Operational output impact Business Process failure Inventory Cashflow
- 10. RESILIENCE Supply Chain Mapping exercise Assess risks across your entire supply chain Prioritise highest risk areas Identify mitigating strategies Apply or have them ready to activate
- 11. RESILIENCE Mitigating Strategies Inventory Spare Capacity Outsourcing / Insourcing Alternative Suppliers / dual sourcing There is some cost involved with most of these Assess cost/benefit analysis What is the cost of not doing anything?
- 12. RESPONDING TO THE CRISIS Before the crisis? When the crisis is happening Returning to Business as Usual Longer term
- 13. RESPONDING TO THE CRISIS What should you do now? Three key activities Communicate Plan Assess
- 14. COMMUNICATE Customers How is their business impacted? What changes in demand are they seeing? What does that mean for you? How can you help them? Provide reassurance
- 15. COMMUNICATE Suppliers Share your plans What is their current & future supply situation? What risks do they have in obtaining materials or maintaining production? What demands you expect to place on them? How can you help them?
- 16. COMMUNICATE Internal teams & colleagues Keep your own team fully informed Provide reassurance Understand impacts across rest of business Resilience plans for coping with absence Prioritise activities
- 17. ASSESS Demand Side Increase – can you respond? Action plan Decrease Reduce/stop output? Any opportunity to recover volume? Pivot to alternative products? Supply side Can suppliers meet needs? Are there alternatives? Is your own capacity affected? What are your options? Product range changes? What did you find out?
- 18. PLAN Temptation not to plan because inputs are uncertain More important than ever! Create and share operational plan Observe changes and react to exceptions Do you have an existing S&OP / IBP / Supply & Demand Plan process? If so, use it now! If not: a good time to start a basic version
- 19. PLAN Demand Planning Data-driven forecasting less relevant Customer engagement is key Consider changes in buying patterns Short term priority but try to keep longer term in mind Consider customer rationing as last resort if demand exceptional Create consensus
- 20. PLAN Supply Planning Take internal & external factors / risks into account Realistic production outputs If capacity is limited, consider consolidating on reduced range Stock deployment Communicate outputs clearly
- 21. PLAN S&OP / IBP Execution Senior management involved Review key assumptions and outputs Identify gaps and mitigating actions Assess impacts Approve plans or make decisions Communicate to all stakeholders Normally this process runs in a monthly cycle May need to increase frequency in short term
- 22. FUTURE STRATEGY This crisis will end! Demand patterns will change again as lockdown ends Keep communicating, keep planning When business as usual resumes Maintain good practice! Perform Supply Chain Mapping exercise Assess Supply Chain Risk Reassess procurement strategy Have a mitigation plan to build in Resilience Use S&OP / IBP process permanently
- 23. SUPPLY CHAIN MATTERS! Remember…. Thank you. Daniel@SupplyChainScotland.org www.SupplyChainScotland.org