by Bertrand Grimm, Associate Director Valtus.
A period of upheaval that makes it essential for companies to adapt
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The Covid-19 health crisis and the events triggered recently between Russia and Ukraine are causing serious disruptions in global supply chains. In all regions, this has or will have an impact on supply, logistics, production, distribution and after-sales services.
The disruptions are directly related to quarantine measures, changing consumer demand (strong/weak/volatile), rebound in manufacturing industry, acute labor shortage…
Faced with this reality, companies are forced to adapt and become resilient in order to continue to thrive. They need to globally reassess their approach to manufacturing and sourcing. They must also secure the services of nimble suppliers and focus their efforts on maintaining their financial health in the short and medium term, wherever they plan to set up.
For some countries, these disruptions can provide new opportunities to attract foreign investment and develop high-quality infrastructure to support more efficient cross-regional supply chain flows. They can also take advantage of the competitiveness of the regions in terms of production capacity, particularly with regard to land, labor and logistics.
Even if companies can prepare for anything, it will still be necessary for them to organize a crisis committee, in order to deal with THE crisis which, by definition, will not have been anticipated.
For the supply chain, it is the same thing, because it is impossible to foresee everything and to consider all the scenarios in advance.
In recent years, who could have predicted the eruption of Eyjafjöll and the closure of air traffic, the severity of the floods in Thailand in 2011, the Arab Spring, the Ever Given blocking across the Suez Canal, the arrival of Covid, the conflict in Ukraine, environmental concerns (electric or hydrogen cars)?… And even if all or part of these events had been “planned”, was it necessary to close the factories in Bangkok? In Tunisia ?
In addition to the variety of these causes, their magnitude can be indeterminate, the reactions and domino effects can also be very chaotic:
„Learn to work cross-functionally, through a structured S&OP process. This is all the more important as the times are turbulent.“
Faced with these uncertainties, the quality of the organization of the supply chain is critical. And it is not at the time of the crisis that we must think about it. The urgent implementation of tools is not enough. They must be appropriated beforehand, it is also necessary that the teams already trust each other.
For example, the S&OP process must have already been run in, and everyone must know their role well. At the time of the crisis, it will be possible to adjust the meeting frequencies in order to take into account the volatility of the data for example, but it will be too late to build the tools, the experience and a certain degree of empirical knowledge…
1. Learn to work cross-functionally, through a structured S&OP process. This is all the more important as the times are turbulent. It is impossible today for a single person to solve all the difficulties on his own;
2. Balance the challenges between service rates, stocks, production costs, etc, do not focus only on inventory!
3. Consolidate progress through a “continuous improvement” approach: address root causes, include corrective actions in ERP parameters, processes, involve the top management
4. Make tests ! By imagining scenarios, by getting closer to the limits, by constantly training, by constantly monitoring original ideas, new tools, the press and professional publications…
5. Stay humble and open, avoiding dogmatism. There are too many scenarios for anyone to pretend to know them all and master them alone;
6. Think ABC for planning, stock strategy… This greatly simplifies complexity and emergency management.
To illustrate the need for several people to think when the crisis is here, I would like to cite the case of a client who had to take emergency measures at the time of the Shanghai lock down: moving his warehouse, transporting stocks to stores and starting to “ship from store”. All of this requires great creativity and great coordination between logistics, IT, sales and legal matters!
Bertrand is Associate Partner at Valtus. He dedicated 15 years of his career to industrial management and carried out numerous international business transformation assignments.
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