Deep Supply Chain – The new normal

Deep Supply Chain – The new normal

Home » Deep Supply Chain – The new normal

Disruption and change are becoming normalised in a way that business has never before known. Global events, transformative agendas and increasing unpredictable consumer behaviours mean it is more important than ever to be able to predict what customers want and ensure it can be supplied before demand is tested.

Post By Stuart Thomas -
Consolidation Director

Coronavirus has stretched UK supply chains to their limit with some important learnings along the way. McKinsey, in their report ‘Resetting supply chains for the next normal’ outline the drivers inspiring companies to consider bold moves in rebuilding their supply chains for the future:
  • 73% encountered problems in the supplier footprint that require changes in the future
  • 48% experienced delays in planning decisions because of remote working
  • 75% faced issues in the production and distribution footprint that require changes in the future
  • 85% struggled with insufficient digital technologies in the supply chain
So, how can supply chain leaders ensure continued product availability whilst undertaking the continued transformation needed to establish a new normal?

Understanding the factors that influence supply chain performance

Consumer behaviours and channel shift:  The restrictions in place during the coronavirus lockdowns have been instrumental in nudging consumers online who have previously preferred to maintain more traditional purchasing habits.  This has led to a significant shift in consumer preferences as there is a greater spotlight on convenience, personalisation and quality in the digital customer experience.  However, this has highlighted the inability of many brands to maintain the necessary supply of products to meet demand, highlighting the need for resilient and flexible supply chain strategies that can be deployed quickly and effectively.

Demand volatility: There has been a seismic shift in consumer behaviours, leading to more impulsive purchases with less regard for brand loyalty, a greater desire for an experience over a transaction and more conscious choices of how much time an individual wants to give to shopping.  Tracking, assessing, and responding to these ever-changing demands is highly complex, complicated further by historic issues with legacy systems, data inaccuracies and a lack of collaboration.  Supply chain businesses need both the strategies and tech that can ensure high product visibility and provide data-driven insights to make quick and smart decisions.

Traditional supply chain: As the industry is only in the early stages of a grass-roots transformation, many supply chain businesses are operating using archaic, time-consuming and labour-intensive processes which result in being both inefficient and costly.  Even slight disruptions can be overwhelm an operation through product unavailability, human error and strategic inflexibility. This situation is further compounded by poor data management which leads to uninformed decision making.  A key focus for transformation must be the ability to capture data in real-time and provide relevant analytics that can enable the realignment of supply chain processes in real-time, ensuring high product availability.

What can supply chain companies do?

Demand forecasting: Demand forecasting in the supply chain is a process used by organisations to determine potential future requirements of customers.  Forecasting figures are usually determined by analysing historical sales data and trends, being aware of market variations such as new trends, seasonal variations and new products that are brought into the market by potential competitors all of which can impact consumer demand.

However, increasing and more significant disruption means businesses may need to completely transform their forecasting approach because of the permanent shift in consumer behaviour or obsoleteness of their historical data.  A more aggregated view collating data from a breadth of sources will need to be combined with cleaned-up internal data, with the power of machine learning applied to understand what this means in both real-time and future demand forecasting; this is already recognised as a necessary direction of travel.

JIT v JIC: Just in Time (JIT) supply chains represent the ideal warehouse management approach, one that is best defined by low inventory levels, a low cost of financing, and most importantly, an adherence to a doctrine of only having what’s required to meet customer demand.  However, JIT is not necessarily the best approach to adopt in times of change and so Just in Case may be the right compromise to move forward.  The JIT model aims to strike a fair balance between contingency stockpiling and costly overstocking; it has assisted in areas with unreliable infrastructure, high-risk transport and active natural disasters (such as floods).

JIC uses disaster planning, risk mitigation funds, and demand forecasting software to create warehoused backups and alternative routes where needed.  Planning exercises and crisis drills are also adopted, adding staff resilience to unexpected problems.  JIC also focuses heavily on the benefits of localisation – onshoring production facilities and shortening freight trips may be far less costly in the years to come. Finding a careful balance between risk and profit by using the best software and data monitoring available will be key to navigating approaches to forecasting.

Improved stock visibility: With increased pressure from customer expectations that demand next day, if not same day delivery, having sight of what stock is actually available across warehouses and stores is key.

Supply chain analytics enables businesses to build an AI-powered ‘out of stock dashboards that focus on the most profitable SKU’s in terms of Total Value Impact and triage the root cause for products going out of stock and fix the situation.   These analytics can help identify the parameters which impact out of stock of a particular category of an item or specific logistics provider, or the item going out of stock on a particular day due to it being in transit.  This allows the planning team to plan better and fix these issues by having remedial measures such as better route planning or space allocation.

The new normal: another step on the transformation journey

Embracing a digital first approach is likely to be key to reaping benefits into the future.  From more accurate forecasts and analytics, reduced downtime and better asset realisation through to faster delivery and turnaround times, it’s digital solutions throughout the entire supply chain that will help eliminate efficiencies, improve responsiveness and reduce overall costs.  It’s also key to future-proofing; conversations about sustainability and reduced environmental impact are already happening and will only intensify.

Disruption and change are becoming a new constant, however learning the lessons they bring and how industry is responding means it is a unique time to reimagine what supply chain management could mean – and how to get there.

Five themes could drive a post-COVID transformation in supply chains. Five themes could drive a post-COVID transformation in supply chain

Observations during the crisis
Emerging trends in supply chains of the future

Rapidly redeploying resources in government and industry to meet essential demands
Developing more-agile mindsets and behaviors, with increased acceptance for previously disputed centralization opportunities

Increasing exposure of supply-chain risks that were previously unrecognized or dismissed
Establishing dedicated risk management functions to prepare long-term risk-mitigation strategies with a greater emphasis on supply-chain management

Rising concerns about supply-chain disruption and shortages of critical goods
Increasing regionalization and inventory storage closer to end consumer, with reexamination of the supplier footprint

Discovering new ways of doing things -eg, online ordering for all essential goods and working remotely
Focusing on capability building, not only for online channels but also for embedding digital tools and skills, eg, in automation, end-to-end planning, and shared service centers for supply-chain management

Recognizing environmental benefits of shutdowns while societies adapt to lower activity levels
Accelerating societal push for sustainability, with high pollution activities increasingly perceived as expendable
Credit: McKinsey

The Supply Chain Experts

With a large network of warehouse facilities and a fully-fledged logistics arm to our business, we are always looking at how ways and means of improving our offering to our clients

Share this Post