Supply chain risk and resilience, dealing with demand and supply challenges, and the importance of planning during times of great uncertainty such as the current Covid19 coronavirus crisis. Presented for Business Gateway Tayside: An hour with Daniel Muir, Supply Chain Scotland, April 2020

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