In an ever-increasing search for efficiency, supply chains have become leaner and leaner, with a focus on driving out cost and just-in-time delivery, meaning ever-smaller levels of contingency and margin for disruption.
The COVID-19 pandemic has highlighted a number of large-scale supply chain challenges across organisations. In a very obvious way (from the NHS and government, to supermarkets, and consumer goods firms), supply chain strategy and resilience has become a front and centre priority for many organisations – and front-page news, too.
Organisations have now largely moved from grappling with the COVID-19 crisis to considering how to reopen and recover from the mass shutdown seen in March, April and May. As the peak subsides, and we enter the post crisis reality, organisations will want to look for the opportunity to reset, reframe, and ultimately re-build following this shock.
What is clear, is that old supply chain priorities (think a sole focus on cost efficiency) will change, and prevailing thought patterns challenged, as a whole generation bears the COVID-19 scars. A re-balancing is likely to occur as organisations seek to build greater resilience, agility, flexibility and partnership working into their supply chain strategies. They will seek to this whilst in many cases balancing cost pressures caused by the financial impacts of COVID-19 - which will clearly present further challenges
With this in mind, what should organisations be doing to build supply chain resilience and robustness, and to reset their procurement and organisational strategy in line with the new reality? What do they need to do to ensure they can survive future systemic global shocks?
We at Moorhouse have produced a 6-point plan which outlines what organisations should be doing as we exit the Coronavirus crisis to reset their supply chain strategy and build in the sometimes painful lessons of recent history.
1. Assess the Existing Supply Chain – Organisations will want to start with a simple diagnostic to test the effectiveness of existing processes, arrangements and partners – ultimately to identify any critical risks in their supply chain. They may want to review existing suppliers, analysing both their financial and respective supply chain resilience to help them understand risk. They will want to use these findings to work with existing strategic suppliers to improve upon identified areas, and set out expectations and timelines for action. A careful balance will need to be met between supporting existing suppliers and building resilience by touting potential new sources of supply.
2. Redefine the core principles and strategy – Businesses will then likely want to conduct a reset of their supply chain and commercial strategy and priorities. They will want to ensure sufficient balance is placed in strategic values between resilience, efficiency, control, cost, pace and quality. They will need to grapple with questions such as 'should we be bringing supply back in house?' And, 'should we be near-shoring critical components?' These questions will need to be answered at the same time, as many organisations are seeing significant pressure on cost.
3. Build resilience into the supply chain – Organisations will need to build greater agility and flexibility into commercial frameworks and contracting processes to ensure they can quickly upscale or downscale agreements in times of potential future shocks. They will also want to undertake workforce planning to ensure resilience from a logistics and people perspective. For potential or new suppliers, they will want to challenge their due diligence and better understand their partners’ respective supply chains to help them identify early warning signs. Underpinning all action, will be a refreshed set of supply chain metrics which place greater focus on core performance indicators of resilience.
4. Develop partnership working with strategic suppliers – throughout the resilience journey, organisations will want to continue to focus on developing strong relationships with strategic suppliers. Working in collaboration, supply chain mapping can help highlight shared pain points, and mutual action required to resolve.
5. Develop and undertake resilience testing – to prevent suffering significantly from future shocks organisations should develop and periodically apply a form of ‘stress testing’ that considers current and future risks to supply chain. This, alongside scenario planning and war gaming will ensure preparedness for future shocks and the identification of key decision makers and decision points.
6. Continue to innovate for the future - there will be an ever-increasing focus on transparency, on improving data and information to enable understanding of risk. This may include the development of reporting to show real-time inventory and production levels and enhanced data sharing with strategic suppliers. It is also likely organisations will want to invest in technology to support remote working and understand resource availability.
COVID-19 has put supply chain to the front and centre of organisational agendas and provided opportunity to help reduce and mitigate the impact of systemic risk. Building greater resilience whilst managing cost and efficiency pressures will be key for organisations looking to future proof themselves for the next global shock.
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