Supply Chain : Paradigm Shift

#supplychain : Paradigm Shift

The #covid19pandemic triggered industry to re-examine their supply chain assumptions. The supply chain strategy that made the most sense in pre-Covid-19 days no longer seems particularly smart.

Irrespective of business scale, be major OEM’S or a small one specially #msme category, the basic theory of supply chain management over the past three decades focused on two goals.?

a. The first objective was to find a sourcing base offer the best combination of price, reliability and quality to the original equipment manufacturer.

b. The second requirement was to work out the most efficient logistics so that the bare minimum raw material inventory could be maintained.?

However Post COVID-19 there is supply-chain paradigm shift and critical is to focus on tomorrow.

#todaysthought

In the current landscape, we see that a complete short-term response means tackling six sets of issues that require quick action across the end-to-end supply chain. These actions should be taken in parallel with steps to support the workforce and comply with the latest policies applicable for each region / country:?

1.??Create transparency on multitier supply chains, establish a list of critical components, determining the origin of supply, and identifying alternative sources especially for #tier2 and raw-material sources. With volatile geopolitical situation sourcing and supply-chain need to have plan B activated today

2.??Estimate available inventory along the value chain—including spare parts and after-sales stock—for use as a bridge to keep production running and enable delivery to customers.

3.??Assess realistic final-customer demand and respond to (or, where possible, contain) shortage-buying behavior of customers. Very strong and frequent communication and predication is key in the manner.

4. Optimize production and distribution capacity to ensure employee safety, and engaging with communication teams to share to update on safety protocols. These steps will enable suppliers to understand current and projected capacity levels in both workforce and materials.

5. Identify and secure logistics capacity, estimating capacity and accelerating, where possible, and being flexible on transportation mode, when required.

6. Manage cash and working capital by running stress tests to understand where supply-chain issues will start to cause a financial impact.

These are few important aspects needs focus to keep business running how-ever future will be more challenging and smarter in terms of way of working.

#futuregoals

Going forward, procurement will not be just "the group that focuses on sourcing of raw materials, goods and services, but rather sources ideas". Creativity will involve engaging stakeholders in new, innovative ways not just delivering new capabilities to the business through external resources.

Granted, we have a long way to go, Make v/s Buy, capital investment, technology sharing with #tier1 suppliers is something that only a small subset of leaders are engaged in today. But this will likely change going forward and become one key performance indicator for measuring creative procurement.

For example, this could take the form of regularly sharing R&D resources and co-creating new intellectual property that ranges from radical shop-floor productivity improvements to new product innovation. And suppliers need to start gearing-up in terms of capability building to be future ready.

#finance

As the crisis takes its course, constrained supply chains, volatile sales and reduced margins will combine to add even more pressure on earnings and liquidity.?

Businesses have a habit of projecting optimism, now they will need a strong dose of realism so that they can free up cash. Companies will need all available internal forecasting capabilities to stress test their capital requirements on weekly and monthly bases.?

As the finance function works on accounts payable and receivable, supplier leaders can focus on freeing up cash locked in other parts of the value chain. Reducing finished-goods inventory, with thoughtful, ambitious targets supported by strong governance and this can contribute substantial savings.?

Likewise, improved logistics, such as smarter fleet management, can allow companies to defer significant capital costs at no impact on customer service.?

Pressure testing each purchase order and minimizing or eliminating purchases of nonessential supplies can yield immediate cash infusions.?

Supplier leaders should analyze the root causes of nonessential purchases, mitigating them through adherence to consumption-based stock and manufacturing models and through negotiations of contracts to seek more favorable terms.

#resiliencebuilding

Once the immediate risks to a supply chain have been identified, suppliers must then design a resilient supply chain for the future. This begins with establishing a supply-chain-risk function tasked with assessing risk, continually updating risk-impact estimates and remediation strategies, and overseeing risk governance.?

Over time, stronger supplier collaboration can likewise reinforce an entire supplier ecosystem for greater resilience and as supplier partner its important how you improve in terms of capability and ability to deliver to be relevant.?

During this process, digitizing supply-chain management improves the speed, accuracy and flexibility of supply-risk management.?

By building and reinforcing a single source of truth, a digitized supply chain strengthens capabilities in anticipating risk, achieving greater visibility and coordination across the supply chain, and managing issues that arise from growing product complexity.?