On March 11, the World Health Organization officially classifying COVID-19 as a pandemic. At about that time widespread customer service issues surfaced across North America and Europe. Close to nine months later, we have seen some companies that handled these disruptions magnificently – they demonstrated supply chain agility. It is worth examining the playbook successful companies used to respond effectively to this crisis.
A Dozen Plays From The Agility Playbook
- The virus originated in China. Companies with supply chains that included China as a key node got advance warning from their Chinese employees of what was happening that was more complete and more accurate that what the Chinese government was reporting. These global companies developed a regional blueprint to react to the disruption that they then replicated in other regions as the virus washed across the globe.
- Risk management and resiliency were not new initiatives for the paragons of agility. Procurement leaders were not just measured on cost savings, but also on supplier risk management. Regular communication with suppliers was part of their job description.
- Agile firms have robust cross functional communication in place. A company that has weekly calls with the supply and demand sides of their global organization will perform better than a company who has one Integrated Business Planning meeting a month. During the pandemic, many companies moved to doing these alignment calls multiple times a week. Some firms moved to daily calls.
- A crisis is both a challenge and an opportunity. Several firms talked about embracing the pandemic as an opportunity to develop a much more robust supply chain.
- Many companies admitted they needed to quickly increase their capabilities by changing their supply chain processes and/or implementing new applications. Many of these changes would have required months, if not years, to fully implement in the past. During the pandemic some companies used the agile project methodology to fast track these changes. Agile project management involves continuously making smaller changes, more often, getting feedback, and then quickly adjusting based on the feedback.
- Companies should not single source key components.
- The definition of what constitutes a “key component” was broader than many firms imagined. A company might be buying a component from more than one company, but if that component itself was built using a component that was single sourced from the suppliers’ upstream suppliers, than shortages occurred anyway.
- Visibility to multiple echelons of the supply chain is necessary not just for effective sourcing, but for being able to manage logistics effectively. As nations neared shut down, companies needed to work overtime to rush components out of that nation or finished goods into it. Real-time tracking applications provide for strong visibility into shipments.
- There are risk notification and visualization solutions that offer a graphical view of a firm’s bill of materials and supply chain across multiple supplier tiers. These applications also show how goods flow through trade lanes and partner facilities into a company’s supply chain. These applications monitor hundreds of thousands of news web sites and social media to quickly and proactively surface alerts. These applications proved their worth during this pandemic.
- The ability to create accurate forecasts degraded significantly for almost all companies during the pandemic. But firms that used demand management applications whose forecasting is based on external data with machine learning had forecasts that adjusted to the new normal much more quickly. Traditional demand management is based on time-series trend forecasting. Time-series trend forecasting means taking an inside-out approach, relying on an organization’s historical, internal data to predict demand. This works OK … until the world changes. The danger is it doesn’t consider external factors that continually impact the market. Further, when it comes to agility, forecasting on a weekly basis is better than doing forecasts on a monthly basis.
- During the crisis the ability to do quick ad hoc scenario planning is critical. Firms that had supply planning applications with concurrent planning capabilities performed better. Concurrent planning links execution plans, the plan for what will be made the next few days or weeks, to the longer-term integrated business plan. Integrated business planning (IBP) matches projected demand to what a company can feasibly make over the coming months. As new short-term plans are created, the linkage to the revenue and profitability goals based on the initial IBP plan becomes instantly visible. Whereas IBP plans are typically created once a month, agile companies adjust their supply chain plans on a daily or weekly basis based on what is occurring in the external environment.
- The ability to do robust scenario planning is based on both the application and the capabilities of planners. The pandemic allowed agile supply chain organizations to uncover their hidden heroes.