Yashwin Bhoola | Senior Manager | Strategy Business | Accenture Africa | mail me |
As the health and humanitarian impacts of the COVID-19 pandemic evolve, so do the business and economic challenges. Organisations looking to balance their immediate needs with longer-term opportunities will see the trade-offs play out across three waves of impact – the Now, the Next, and the Never Normal.
The Now includes an emphasis on supporting people, customers, and suppliers. The Next features refocusing business to withstand new threats and seize new opportunities, and the Never Normal will require navigating rapid shifts in cultural norms, values, and behaviours.
COVID-19 continues to disrupt supply chains everywhere, no industry, geography or channel has been spared. Leaders across sectors of industry have needed to act fast to mitigate a range of long and varied impacts on demand (drop-off, spike, new or shifted), lower operational productivity, and inventory (stranded, drastic or understocked, stoppages or shortages).
The Cost of Goods Sold (COGS) contributes 40 to 70 percent of a business’ cost base. COVID-19 has disrupted end-to-end value chains, with challenges every step of the way; from sourcing raw materials for production and logistics, manufacturing during plant shutdowns and social distancing and delivering amid reduced warehouse operations and transportation restrictions.
It is a critical business imperative for organisations to not only act now but to also plan for future disruptions to protect not only COGS but also profit margins in the Never Normal world.
How business can outmanoeuvre uncertainty
Applying a zero-based lens across the supply chain provides the visibility needed to make deployment and cost containment decisions, identify opportunities for immediate relief and risk balancing, whilst executing with resilience, supported by a deep analytics backbone.
A Zero-based Supply Chain (ZBSC) provides the building blocks to accelerate this journey rapidly. By radically shifting cost curves and boosting performance across the supply chain, the business can create new value to fuel sustained growth in the Never Normal world.
Creating visibility
Now more than ever, enterprises need to understand what is happening in their supply chains, at their production sites, and across ecosystems to best respond to ongoing demand changes.
Changes in consumer behaviour, increased demand volatility from unpredictable events like future pandemics, natural disasters, social unrest, as well as new norms like more at-home consumption, the expectation of the end-user, and product hygiene will make supply chain visibility essential going forward.
To become more resilient, companies will need to create real visibility of demand and supply at all stages of the value chain to understand risks and opportunities to act rapidly, combining financial and operational data across the organisation.
The steps to create visibility:
- Capture data: Capture financial and operational data at an actionable level to understand performance and make surgical cost decisions including closing plants, inventory reallocation, etc.
- Connect systems: Create full visibility across the ecosystem of suppliers, distributors, and end-users to know where risks are developing and to take action. Leading companies are strengthening their control tower capability to build a competitive post-COVID-19 supply chain.
- Build analytics capability: Build an expandable analytics platform, applying a pragmatic mindset to action versus perfection that allows for monitoring through dashboards, scenario planning, and predictive analytics.
Wire in flexibility and agility
Organisations will need to rethink ecosystem talent across the value chain and balance cost and safety with flexibility. An important question to ask is, ‘Do I have what I need when I need it?’
Organisations can achieve flexibility with talent while balancing the three C’s – Cost, Capability, and Capacity – by following these five steps:
- Identify critical work: Identify what work is critical across the value chain (strategic vs transactional) to operate in the Never Normal. Operations in the Never Normal will have a high degree of variability requiring flexibility in the talent pool.
- Explore talent elasticity: Explore talent elasticity and liquid workforce pools. Maintain a ‘core team’ with a ‘flex team’ to ramp up and down to balance cost and safety flexibility.
- Understand work requiring physical presence: Understand what work will require physical proximity or presence to operate in the Never Normal, including work with ecosystem partners.
- Build partner ecosystem: Build an ecosystem of partners, leveraging suppliers and contract manufacturers to provide flexibility and balance a variability curve, which will look more like a ‘W-curve’, one with cycles of disruption and recovery.
- Selectively invest in digital: Invest in technology and digital tools to enable remote operations and virtual workspace to amplify human and machine intervention, where scenario analysis confirms value impact.
Strengthen resiliency
Operations leaders are already asking what they can learn from the COVID-19 crisis to prepare for any future crisis.
Organisations need to re-examine how existing assets and capabilities can be used and re-evaluate how upcoming investments contribute to accelerating recovery while building resiliency.
Steps to strengthen resiliency:
- Understand assets: Understand which elements of supply chain operations met acute change in demand or were able to be re-purposed for alternative use. Learn from what worked to build capabilities to bridge gaps for future resiliency, such as investing in operational analytics, manufacturing digitisation, and data-driven scenario analysis.
- Explore automation opportunities: Take stock of automation opportunities like process automation, digital streamlining of in-plant, DC, or fleet operations. Use the visibility gained from the ZBSC to make smart investment choices. Balance short-term value with increasing long-term reliability needs, for example, digital factory and warehouse robotics.
- Introduce control-tower like capability: Create a robust control and monitoring capability for the Never Normal to balance reliable output for customers and operational health and safety controls across the supply chain and value for shareholders. Embed this capability into the control tower to generate holistic views across the extended supply chain.
Preparing for uncertainty
The impact of COVID-19 on the supply chain will continue to impact all aspects of organisations value chains. This is the moment to reinvent business models and reintegrate the value organisations provide into a new societal landscape.
The time to shape a mindset of bold business transformation powered by new approaches to technology and responsible leadership is underway. A Zero-based Supply Chain will accelerate organisations recovery of COVID-19 while mitigating the future risk of supply disruptions.