Covid-19 is having a devastating impact on world health. It is also hammering the world economy as demand is down, supplies have evaporated, and cash flow has become a challenge for many companies. Companies around the world are struggling to keep their supply chain viable, their financials healthy, and their customers happy. None of these things are easy, but executed correctly can create new industry leadership. Below are some solutions for supply chain leaders to consider.
Suppliers are hurting
Problem: Suppliers for many industries are scattered across the globe. Many of them are experiencing an unprecedented decline in demand. A significant percentage of these companies will not make it, despite government aid.
Solution: Decide which suppliers are crucial and do whatever is possible to keep them afloat. Sometimes this means ordering more from the supplier (at a lower price), even if your company may have to carry excess inventory. Often it means deciding which suppliers are crucial and channeling business to them at the expense of other less-critical suppliers. Sometimes it means using non-interest loans or other measures to help keep a supplier viable.
Demand is at catastrophically low (and sometimes super high) levels
Problem: With many of the world’s economies facing demand that is catastrophically lower than they have ever experienced, change is afoot. Unless you’re in the video conferencing business, few companies have unprecedented high demand and if they are fortunate to be in that position, they are unsure of how long that level of demand will last. Demand is uncertain and ranges from almost non-existent (airlines), to greatly impeded (footwear), to high but uncertain (flour).
Solution: Get fanatical about understanding true demand and encouraging new demand, where possible. This probably means upgrading your ability to collect and use new types and sources of data. Consolidate SKUs so that you can make and deliver something important. Dynamically price what you sell.
Cash flow is TIGHT
Problem: With demand off and costs high companies are having trouble making budgets or even having sufficient cash flow.
Solution: Reduce labor costs, seek government aid, trim extra expenses, BUT make the right investments in the Digital Supply Chain and your future workforce. It is important to invest in things that will help customers and create a new level of digital efficiency. It is also important that all costs be trimmed to a level that allows your company to deliver whatever it does without facing credit issues.
Customers are frustrated
Problem: Some customers can’t get what they want, and then they can’t assemble and sell what their customers need. Some customers are unhappy with their future “agreement to buy” contracts. They just don’t need the volume anymore.
Solution: Take a deep dive into the New Customer requirements. Most companies will benefit by taking a fresh look at their customer base and deciding what new factors are important. The market has changed in some fundamental ways! Decide how your Digital Supply Chain strategy will change. Make sure that your supply chain creates a better way for customers to buy. Think about new business models that give the customer what they need.
Employees and shareholders are worried
Problem: It is no surprise that employees are worried about job security. It is also not surprising that shareholders are worried about preserving and growing the value of their investments.
Solution: Recognize high-performing front-line employees for their contributions, even to the extent of increasing their pay. Give careful thought to the type of skills that are needed in the future and make sure to retain the people that fit that talent profile. One important skill area that needs attention is data science/analytics. These skills are often hard to find and may require additional compensation to attract and retain employees. It is also very important to allow people with specialized data skills to work closely with line management. That way the manager gets the advantage of the numbers and the numbers people get to learn the business!
Companies are taking action, and it is helping!
Problem: Organization silos always create issues, and in a pandemic, they are extremely problematic. You must find a way to work across silos to make the customer happy.
Solution: Setting up a war room is a good short-term way to handle this. Cross-functional teams that are motivated to make the customer happy and improve financials are being deployed at many companies. The most effective companies find a way to work across organizational silos. This means that they have supply chain, marketing, finance, and HR working together on the same issues. The focus of these cross-silo teams is on improving service to the customer, making financial plans work, and out-performing the competition.
Some companies are well on their way to changing how they manage their supply chains to keep customers happy and improve the balance sheet. The companies that can successfully execute new digital supply chain strategies will be the ones that emerge as an industry leader.