The Corona Effects on the Current Supply Chain
COVID-19 took us by surprise and we were not even close to being ready for a situation like this — Even’s Amazon’s models couldn’t have predicted this!
The global supply chain is fueled by outsourcing and thin margins and Covid-19 has proven how fragile (or, rigid) it all is. Until now, the supply chains were stocking supplies efficiently in just the right amount (just-in-time manufacturing). However, when the demand spiked, everyone felt the effects of it.
“We do not see a supply shock in the sense of the availability,” said a UN economist to Bloomberg. “But there could be a supply shock in terms of logistics, not being able to move supplies from point A to point B.”
The majority of logistics players who influence the global supply chain (directly and indirectly) don’t have any visibility or a plan to deal with this kind of disruption. The supply chain just doesn’t have enough inventory buffer for a 20x shock!
Delivery is Eating the World.
In these times when all of us are locked down, delivery and logistics are what is powering the world.
Grocery Companies such as Instacart, Walmart Grocery, and Shipt have seen their daily downloads surge by 218%, 160%, and 124%, respectively. Ecommerce Companies such as Amazon have hired 100,000 more workers to be able to respond to the surge in demand. Deliveries of PPE (personal protective equipment) such as masks, ventilators have been surging almost 20x! Empty aisles and stock-outs in supermarkets are leading to logistics companies such as FedX and UPS partners working overtime.
Are we Throwing Away a Goldmine?
The incumbent supply chain process favors just in time and cheap manufacturing makes it difficult to sustain sudden shocks and supply shortages.
One of the prime reasons this happens because this business is handled manually. The widespread use of location data is completely ignored across industries, which is why a large percentage of companies don’t even collect it in the first place! This has made both our preparation difficult as well as response reactive.
When companies have advance knowledge of where the disruption will come from and which products will be impacted, they have lead time to execute avoidance and mitigation strategies immediately — like shaping demand by offering discounts on substitutes, buying up inventory, booking capacity at alternate sites, controlling inventory allocations.
The supply chain becomes a company’s biggest risk during times of disruption. But by making it antifragile & resilient it can become its biggest strength & assure it combats future shocks.
How can Companies use Location Analytics?
In cases such as this when we can’t predict what’s gonna happen in the next few hours, we need to react instead. Delivery companies need to reach their customers in the fastest way possible and deal with this demand surge optimally.
And one of the ways in which we can react or plan more efficiently is to know the supply chain risks, and preemptively develop strategies. But how?
1- 24X7 Monitoring
The need for monitoring has never been so critical. Being proactive about monitoring will help stay on top of disruptions, as you can triangulate within minutes or hours how their supply chain could be impacted in the days, weeks, months to come.
When businesses have no visibility over their supply chain beyond the first tier, especially their tertiary suppliers then they have no control and can’t locate where the threats to production capacity exist. This makes the situation to fight with the Covid 19 extremely difficult!
Monitoring is not only a strategy for dealing with the impacts of the COVID-19 outbreak, but also a best practice for supply chains at all times — David Shillingford, Resilience360. [Source]
2- Scheduling Orders
With orders surging, promising the right SLA to the customer and then sticking to it becomes crucial. The SLAs need to be decided optimally based on metrics such as the location, profitability, time taken as well as resources available.
For the orders which take the maximum time to get delivered, additional delivery charges might offset the cost incurred to deliver quickly. Companies can reduce the TAT by pinpointing the pickups and dropoffs points (or loading and unloading centers) that take a fair amount of time.
3- Managing Inventory
Inventory management can be attributed to analyzing the following:
- Evaluating the inventory available: Accurately understanding the stock of inventory accessible (finished goods, spare parts, parts in transit, supply currently with customers and after-sales stock), to be able to keep the production on and being able to deliver to the end customers.
- Demand Mapping: Analyzing how the demand patterns of end-users for different categories of goods would be like and responding to the buying behavior of customers using metrics like order type, density, frequency. Another very important parameter to look at over here number of returns.
Running short of inventory is essentially a supply-demand mismatch problem. One of the companies that we are currently working with is re-distributing inventory between their warehouses!
“Don’t wait until the gun is pointed at your head to think about mapping. Identify and estimate logistics capability, try to fastrack when possible & be flexible on the transport medium.” — Philip Palin, Researcher [Source]
4- Network Mapping & Planning
- Mapping: Tracing the entire supply chain, pinpointing the production units, nodes and routes are critical. This would help in identifying suppliers along with contractors and being aware of which parts originate and pass through which sites.
- Eliminating Inefficiencies: Companies need to identify routes that have the most deadhead and end miles historically or delays. Avoiding them, to the extent that it is possible can help in the long term!
- Warehouses: Companies also need to track how their warehouses are performing depending on metrics such as shelf time of goods, demand within 2 kms and intervene to either improve their performance or shut them down.
The Covid Pandemic will also force companies to expand to previously unserviced areas. Companies should expand and provision your supply based on the latent demand rather than going on the ground team’s gut.
You could also overlay covid-19 datasets or even external data such as weather, mobility/traffic and satellite data on top of your existing internal data to map demand and opportunity.
Accordingly, using correct data sets and forecasting tools will be crucial to companies as they navigate the current market environment and continue to make strategic decisions- Bloomberg. [Source]
At Locale, we are helping delivery companies to monitor their delays, deviations, take quick data-driven decisions & stay on top of their supply chains as we fight through these hard times.