Preparing supply chains for COVID-19 recovery and beyond
With the UK Government now easing lockdown and putting plans in place to try and help the economy recover, the manufacturing sector is focused on a gradual return to a new normal. As industry begins to evolve from the initial COVID-19 response phase and businesses adjust to meet new demands, it’s important for companies to consider how they are preparing their supply chains for the next stage of recovery, and beyond.
Organisations will need to develop and deploy new strategies across their operations to remain competitive and help their business thrive. But how can they best plan for the recovery phase and make certain their supply chain is fit for the future?
Lessons learnt from the crisis – Future planning and a new role for digital
All manufacturing companies have learnt a host of lessons from the crisis. At a high level, the first is not to neglect the importance of future planning. The crisis has disrupted international supply chains, suspended business operations and significantly decreased revenues. To ensure longevity and the ability to operate in the future business environment, organisations need to prepare and adapt quickly to continually changing external unpredictable influences.
Forecasting relies on historic data and presumes the future is similar to the past. With the current crisis, the future is going to be unpredictable and therefore using recent historic data is unlikely to provide an accurate guide of what is likely to happen down the line. Alternative models will need to be developed to provide more accurate forecasting. The adoption of machine learning algorithms that can be trained with relatively small amounts of historic information, as well as new types of data feeds being captured in real time are likely to be instrumental in making this happen.
In general terms, businesses will need to concentrate on cash flows and liquidity, ensuring customers are paying in a timely manner. There will also have to be a focus on meeting customer demand and providing optimal customer services. This may involve working more collaboratively with their customers to limit the range of products and focus on products where the supply of components is easier to source at the right cost.
At a more granular operational level, organisations have also learnt some other important lessons from the pandemic. One such is the need for continuous flexibility and adaptability. Companies dependent on offshore production should consider moving some manufacturing onshore or closer to their core markets. This will allow them, for example, to spread the risk across suppliers.
Another key lesson is the importance of digital technologies in enabling manufacturers to rapidly adapt or change their operating model. Organisations currently operating a digital infrastructure were able to adapt quickly and pivot their business to satisfy new customer channels and products etc. The ability to access real-time data enables businesses to improve their forecasting and decision-making rapidly.
Having real-time data visibility and end-to-end connectivity along the supply chain, using technology such as blockchain, provides businesses with greater visibility into their suppliers.
Digital technologies also support improved and alternative forecasting methods including “what if’ scenario modelling using both internal and external data sources. This may involve adapting forecast models and updating them to reflect a changed world.
Predictive analysis, statistical and probability modelling techniques, behaviour analysis, machine learning and data mining techniques are all capable of analysing current and historical facts to make future predictions.
“Taking the long view” – Strategic shifts that the crisis will drive
In planning for the longer term, of course, businesses need to be aware of changes to the economic landscape. That means asking a number of important questions: are we in the right markets and selling the right products? What skills do we need in order to pivot to alternative products, or new markets? Businesses must be prepared to evaluate the resilience of their end-to-end supply chain, working both up and down the chain with customers and suppliers, sharing data and providing more insights. This should involve working with suppliers beyond tier 1 and 2.
Linked to this is the need for a full-scale lockdown exit strategy. Again, there is a lot to consider. Businesses will need to gauge, for example, how staff can best return to offices while maintaining social distancing protocols. Assessing the impact on productivity, costs and employee morale will be crucial.
Businesses must also consider developing a digital strategy with a robust digital backbone reimagining how they can increase their online presence, create alternative channels and develop new customer channels. They should also consider how they can become more agile and flexible within the supply chain, and able to switch to alternate/new suppliers if required.
As they plan for life beyond the pandemic, organisations must also embrace new ways of working and operating; for example, a blend of office and home working will now be normal for many organisations, and, reduction in office space to cut costs will be a priority.
Through this phase, it is key to focus on effective people management and good clear communications. Businesses should invest in training, ensuring their employees understand the changes in the business, how they are likely to affect them directly and what they need to do to ensure they remain efficient and productive in the new normal.
Putting the groundwork in place
As manufacturing businesses emerge from lockdown and move into the recovery phase, they face a raft of operational and strategic challenges as the ramifications of COVID-19 will continue to be felt for a long time. Greater and more informed use of digital technologies is key to improving future forecasting and decision-making, thus setting a foundation for new operational models that ensure long-term business resilience.
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