COVID-19 Supply Chain Recovery: Act Different and Drive New Outcomes

Ugh. <Face plant...>

My mailbox is full. It seems that "supply chain experts" are everywhere wanting to give me advice on the remedy for current disruption issues. They want my ink and endorsement. PR agencies are reaching out to encourage me to write about their companies. I find it to be noise, in a time where supply chain leaders need to stand elbow-to-elbow to define the new normal. The issue? We don't have the answers. This pandemic is humbling. We are writing a new case study in supply chain management. All we know is that history is not a good indicator for the future.

As a result, I push 'delete,' 'delete,' and 'delete' on these requests in my inbox, I reflect on the fact that we do not have good answers. Trading partners are adjusting to a new normal. Companies will initially scramble, and then experience an eerie period of quiet.

The supply chain will adjust in waves. Demand will shift. As we enter community spread, co-workers will get sick. Business shutdowns will ripple through the economy. The shifting of demand from elective surgery to emergency response, will dramatically change healthcare. The trucking companies, that we take for granted, will struggle to get drivers.

The impact at first will be very regional. ...then it will be more pervasive and longterm. The only constant will be surprise.

There is no magic bullet. I believe in analytics and modeling, but we are a long way from the autonomous supply chain being a reality.

What To Do?

If you are a supply chain leader, you might ask what do you do? Where do you turn?

Step back and reflect. These are unparalled times. We have never had "Supply Chain" make headline news like it does today. So, I thought I would pen a note to drive a discussion with supply chain leaders. Use this list to start a dialogue and then add your thoughts in the comments:

Redesign Business Systems to Move Data at the Speed of Business. Now is a good time to rethink processes and remove data latency. What good is a process if it does not provide data at the speed of business? Real-time data introduces noise to the system. Focus on analyzing patterns.

To emphasize the point, let me share a story. I have tested positive for COVID-19 last week. I believe that I contracted the virus on a longhaul flight on March1st. I showed symptoms on the 5th and wrote a note to my physician. At that time, the only available tests were in the Emergency Room. There was a ten-hour wait in ER, so I chose to wait. Concerned, on the 8th, I sent another note to my physician, and was told that I could test on March 12th at a local drive-through center which was in a farmers field an hour from my house.

Five days later I got the test results. My symptoms are mild, but I learned that I tested positive when I was almost well. The issue? The testing supply chain was not designed to move at the speed of the virus. With multiple handoffs between parties, the availability of resources, and the lack of governance between the CDC and public health, the process was too slow.

Now let's apply this concept to the supply chain. Long supply chains with multiple handoffs, and lack of interoperability will get goods to markets when there is no longer demand from consumers. The reason? Demand has changed as supply slowed. We need data at the speed of business and in the right format to synchronize the supply chain. The empty shelves at the grocery store for toilet paper is a clear example of the failure of supply chain integration and the need for multiple party synchronization of the demand signal. The reason? Manufacturers average seventeen days of inventory, and would love to ship the product, but the pace of translation of shelf take-away to order replenishment is slower than market purchases.

Redefine Demand Plans. Tether your supply chain to consumption data and align to synchronize supply with market demand. Realize that the order patterns of the past are not a good indicator for the future. As a result, output from traditional forecasting systems, Distribution Requirements Planning (DRP), and Materials Requirements Planning (MRP) are not useful. Analyze inventory positions based on consumption data. Don't rely on traditional processes.

If consumer products companies were using point-of-sale data, the toilet paper shelves would not be empty. In my quarantine, I have tried to order toilet paper on Instacart four times and Peapod twice, but to no avail. Five retailers' web presence on Instacart is not in sync with the shelf patterns, and eCommerce grocery delivery is swamped.

Simplify the Product Portfolio. The simpler the product portfolio the easier on the team in this stressful period. Use this time to rationalize the product line, and ask the question, " Should this product should be produced?" Let me share a story. A Reuters reporter called last week to discuss the impact on the fashion supply chain. Her concern was the ability for luxury goods manufacturers to source fastners from Chinese suppliers. I smiled and said, " I wish that this were the problem." I continued, "I think that the focus should be if the goods should be produced at all. With quarantine and stay-in-place edicts, consumers will not be buying luxury handbags and high-heel shoes." Now is the time to ask the hard questions.

Keep a Cool Head. I remember running a warehouse for an ice cream business. When I implemented a warehouse management system, vanilla ice cream fell off the pick list at Christmas. It was unfortunate because vanilla ice cream sells the best in the holidays. When we discovered the problem, we sent team members overnight to fill shelves. However, the sales vice president had me stand-up at the management meeting to berate me for fifteen the fulfillment issue. A business issue that was remedied became personal.

Things happen. The only constant in this recovery will be surprise. Do not let the fulfillment issues become a personal problem with the team. Take care of associates. Don't judge. Ask how you can help.

Act Ethically. If supply is limited let upstream partner know. Try to share accurate data daily. Be proactive and offer substitution options and avoid price gouging. Focus on reliability and data sharing.

Baxter is an example of what not to do. When Hurricane Maria decimated Puerto Rico, forty-percent of the United States IV bag supply was interrupted. US hospitals learned of the IV shortage five-months later when goods ordered did not show. The manufacturers started finding alternate supply and working with the FDA months after the hurricane. The lesson? Now is the time to be proactive.

Train, Train, Train. As quiet descends on the supply chain --a shift in consumption for some supply chains and the shutdown of businesses--use this time to train employees on supply chain basics.

Supplier Development. Many suppliers will not make it through this business downturn. Reach out to suppliers and find out how your company can help. While the traditional supply chain pushes cost and waste backwards in the supply chain, companies that are better at supplier development can align resources to try to improve the health of downstream suppliers.

Clean-up Data. Let's face it, in most of our supply chains, planning master data (cycles, lead times, conversion rates, and yields) are not correct. Resources are tight. Use this time to focus on data clean-up.

The Turnaround Will Take a Village

I am posting a podcast tomorrow of a company that saved ten million dollars by rationalizing materials based on the redefinition of demand and the clean-up of planning master data. Their business focus was to be sure that in a time of tight resources that the right products were being manufactured.

Let me end with a story. In the depths of the 2007 recession, DuPont asked for time to discuss the market with their lead economists. I laughed because I sat a the BACK of my economic courses at Wharton, and was humbled to be asked. The problem for DuPont was that demand latency for their product was seven months. (Time from consumption to order translation by DuPont.) As a result, the DuPont order signal was seven months out of sync with the market. Bad news travels slowly in an organization and good news travels quickly. So, as sales started to slow, DuPont, due to investor relations issues, did not slow production. As a result, the company built inventories and then had to shut down plants. The economists question for me was "Is the economic recovery going to be a U a V or a W?" As they asked me the question, I laughed. My answer was, "While I am flattered by the question, why are you asking me, when you have access to market consumption data and market indicators? Why not use market data versus order data, and sense this yourself?" The room was quiet...

These are my thoughts. I welcome yours. Please share your thoughts below. Now is the time for supply chain leaders to stand shoulder to shoulder.