Managing supply chain disruption in the wake of Covid-19

Many managers have, at some point in their careers, risen to unlikely challenges. For most, coronavirus is unprecedented. As we move into a cautious easement of lockdown conditions with no imminent widespread treatment or vaccination, it is likely that we will have to learn to manage under the threat of recurring restrictions for the foreseeable future. As a result, we can no longer consider COVID-19 to be unprecedented as we move forward.

This is, for the time being, our new normal.

We are able to directly influence how our businesses adapt to this transition, supporting our employees and customers to address their needs. However, the coronavirus pandemic has starkly highlighted our reliance on our extended supply chains. The global nature and connectedness of modern business is more visible than ever before. So what can we do to address the impact of future restrictions on those areas of our business where we have only indirect control?

1. (Re-)Evaluate resilience

When considering supply chain resilience, we tend to look towards options for failsafe and redundancy, while maintaining efficiency (eg. just in time production methods). There has also been focus on the geographic locations of our supply, and a potential rethink of the strength of such a globalised supply chain. However, disruption is impacting even locally sourced products.

Take, for example, when flour briefly became a distressed commodity on our supermarket shelves. It wasn’t that flour was coming from far afield, or that supply was diminished through panic buying - it was that the supply chain was geared towards a different customer requirement.

Supply was plentiful, but after years of high customer demand from hotels and restaurants, capacity was more suited to delivering in bulk. Much as I am partial to a slice of banana bread, I would struggle to justify (or store!) catering-level volumes of self-raising... The challenge to these suppliers is how they can adapt to a potentially temporary change.

2. Take a fact-based approach

Against a potential backdrop of future localised restrictions irrespective of geography, do we fully understand the impact on our operations and of the suppliers we rely upon? To ascertain resilience, this requires a view of the supply chain that is dynamic and fact-based. Any review should start with some consideration of your supply chain to the ‘n’th degree. For example:

• If this service/supply were to suddenly stop, how will it impact on my future operation?
• How long could my business continue without any further supply?
• Could I in-source? Over what time and cost, and without disrupting customer operations and internal operations?
• Does my business rely on a supplier being able to ship locally, nationally or internationally?
• What is the health of the supply market locally, nationally and internationally? What margins do my suppliers operate within? How long would it be before a disruption event to a supplier would be critical to my business?
• Is my supplier dependent on further supply (to the ‘n’th supplier degree)?

The answers may lead to some difficult messages from our current suppliers; it is an unfortunate truth that many may not survive. Of those that do, they themselves could face disruption or reduced service for months and years to come.

3. Become the ‘customer of choice’

Many companies have realised how fundamental their supply-chain is to the future success of their business. However, some are still dictating practices that could be damaging to their critical supply-chain.

We have all seen articles documenting cancelled confirmed orders, refused payments and suppliers left to foot the bill. There is no doubt that these decisions are being taken as a protective measure during these difficult times, but do we understand the future ramifications? Businesses (and customers) have long memories.

Perception of poor treatment can leave lasting reputational damage, but also can impact the relationship with your critical suppliers. They may, for example, take a view on your desirability as a customer of choice. During any future disruption, this may play a pivotal role in whether a critical part of your supply chain will choose to support your organisation. How is your approach impacting your suppliers? What about their suppliers?

An adversarial approach may give a short term benefit, but a longer term collaborative strategy may become critical to your success. You must become your suppliers’ ideal customer – make the organisation as invaluable to them as they are to it.