In the COVID-19 crisis, supply chains are taking center stage and the stakes are higher than ever. What began as a supply-side disruption localized to China has morphed into a set of multiple disruptions with myriad impacts to supply, demand, and work processes. We discuss these areas of impact below and provide guidance in each area.
SUPPLY IMPACTS
Given the global nature of this disruption, inventory issues will likely persist for some time. Most organizations only keep a few weeks of inventory on hand and have depleted that stock. The situation is exacerbated by panic buying that has driven shortages of household items like hand sanitizer, disinfecting wipes, and toilet paper. As the reach and impact of COVID-19 continues to grow, impacts to supply will grow as well. What steps should supply chain leaders be taking right now?
Actions to Take
» Map your supply chain. Where are your supply chain nodes, and where are your suppliers’ suppliers and even their suppliers? This is a good practice to follow at any point, even when the pandemic eventually subsides.
» Monitor and measure your situation through close communication with vendors and
suppliers. The last thing you want to be doing in this moment is attempting to strong-arm
suppliers with heavy-handed terms. Now is the time to focus on collaboration and strong
relationships with your most critical suppliers. Your ultimate success is tied to their success.
» Create scenario plans. Be prepared to answer a wide range of “what if…” questions now so that you have an action plan when they become reality. By now your organizations should have identified alternate suppliers and have a supplier risk management plan in place. If you haven’t, start now to identify and qualify alternate sources of supply. Can they ramp up to the volume you need in the time you have?
» Check your contracts. How are they written? What are your legal obligations? Can you give your suppliers room to innovate in the face of scarcity?
DEMAND IMPACTS
While high demand is straining supply in some critical areas, unprecedented declines in demand are also driving widespread disruption right now. Travel cancellations and postponements of entire professional sports seasons (and countless other events) will have huge revenue impacts on the hospitality industry as well as small business vendors who make their living selling product at these events. The food and beverage industry is also reeling as bars and restaurants do their best to adjust to delivery and carry-out-only business models. In many ways, the ultimate impact on demand is difficult to predict because the reality is constantly changing.
Actions to take:
» Identify key customers and talk to them about their anticipated demand.
» Consider demand shaping. Can you shift customers’ demand away from products where
you may be in a sole source or backorder scenario to products that you can more reliably
manufacture or distribute? This can also apply to services.
» Strive for an integrated view of all your inventory across channels and locations. Know
what you have and where it is. Leverage analytics.
» Subscribe to a digital alert system to stay updated on global changes. You don’t want to be the last to know the latest.
WORK PROCESS IMPACTS
COVID-19 has undeniably impacted the way that daily work gets done. To navigate the new reality of COVID-19 in your supply chain, ask these key questions of your organization and its leadership:
» Can your supply chain handle 100% remote workers (in those roles that can be remote)?
Have you been in touch with your IT and KM leaders to make sure that your systems and
collaboration tools can handle the change? How will your organization handle integrating
and managing roles like production that cannot be remote?
» OSHA’s Guidance on Preparing Workplaces for COVID-19 estimates high rates of employee absenteeism as a result of this virus. What if your key approvers are out ill? Do you have cross-trained employees who can take over their responsibilities?
» Do you have business continuity plans that can kick in to guide behaviors? Have you tested those plans?
» Do you have documented process maps that identify the roles responsible for each activity in your critical business processes? Are those accessible by your now-remote employees?
» Is your organization prepared for the risk of knowledge loss? If key personnel are ill,
quarantined away from home, or worse, do you have the most important organizational
knowledge captured? If not, do not delay in getting that information out of people’s heads
so it can be shared.
Do not stop measuring and communicating around performance right now—even if it is bad news. You will need and appreciate that data once things turn around. In many ways, COVID-19 presents an opportunity to turn the spotlight on supply chains into a longer-term benefit and a seat at the strategic table. It’s also an opportunity to build supply chains that are even more resilient than they already are. If you can do so, it not only benefits you and your organization but countless others who rely on strong supply chains for daily needs and critical supplies in times like these.
This article is written by APQC in the document COVID-19 ORGANIZATIONAL SURVIVAL GUIDE, Featuring insights and strategies from APQC’s 5 major research areas.
ABOUT APQC
APQC helps organizations work smarter, faster, and with greater confidence. It is the world’s foremost authority in benchmarking, best practices, process and performance improvement, and knowledge management. APQC’s unique structure as a member-based nonprofit makes it a differentiator in the marketplace. APQC partners with more than 500 member organizations worldwide in all industries. With more than 40 years of experience, APQC remains the world’s leader in transforming organizations. Visit us at https://www.apqc.org/, and learn how you can make best practices your practices.
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