COVID-19 has had an incredible impact on every aspect of the global social and economic fabric. From a supply chain perspective, the response from people feeling uncertain led to panic-buying and stock-piling of essential products. In turn, this created enormous demand fluctuations and forced an immediate response from suppliers, shipping companies, and manufacturing facilities. Unfortunately, many of those in the industry could not keep up with the volume increase due to decreased supply chain agility.
Consumer behavior created a massive and unexpected surge in demand, which demonstrated the fragility in some links of the supply chain- and a textbook example of the bullwhip effect in action.
In this global economy, where all aspects of businesses are interdependent, how do you prepare for potential future global events? To help you better prepare your supply chain and increase its agility in a post-pandemic world, our team of logistics professionals is here for you. Schedule your free consultation today to learn more about how our RedwoodConnect 2.0 platform and the guidance of a reputable 3PL may just be the perfect combination for your business.
Until then, we have come up with a few tips to get you started...
Understanding and Preparing for the Bullwhip Effect
The bullwhip effect is a concept used to explain inventory fluctuations and inefficient asset allocation that can come as a result of demand changes further down the supply chain. In this scenario, upstream manufacturers experience a significant decrease in forecast accuracy as the number of links in the supply chain increase between the customer and the manufacturer.
Fluctuations in demand happen under normal circumstances, but as this pandemic has shown, dramatic shifts in demand increase the negative impact of this bullwhip effect.
One method of preparation is to acknowledge that high buffer inventories exist throughout the supply chain. Completing a detailed stock analysis of the inventory points, from stores to raw material suppliers, can help to discover both the need for an increase in or excess inventories.
Supply chain managers can then take steps to further analyze the reasons for inventory issues, take corrective action, and set norms. It is also critical that managers in different departments communicate these norms to prevent any potential conflicting targets from developing into a bigger issue.
Improving Immediate Reaction Times
When a global crisis demonstrates the need for companies to transform their supply chains, faster responses in the short term are needed for companies to immediately react to and overcome their current supply chain challenges. This can be done in a variety of ways.
Companies can research and activate alternate sources of supply by fast-tracking qualifications, redeploy strategic inventory to prevent stockouts in the event of labor disruptions or border closures, or consider alternative shipping modes with trade-offs on time, cost, flexibility, or availability.
Making changes to production schedules when possible and focusing on inbound material visibility are also critical to the ability to respond to demand, achieve agility, and gain a competitive advantage.
Preparation for the Future
Start by focusing on what needs to be done to improve and optimize inventory strategies across the network.
Using segmentation, for instance, you can identify which products may need to be built ahead of time for the economic rebound. This can allow for an assessment of the supply chain network for flexibility in regard to critical production capabilities. If you haven’t already, we highly recommend you invest in digital supply chain and visibility tools such as RedwoodConnect 2.0 or RedwoodInsight.
Digitizing a supply chain improves the speed, accuracy, and flexibility of supply and demand responses. Utilizing tools that provide line-of-sight into capacity constraints of all levels of suppliers allows for a more agile response across the supply chain.
Finally, spend some time evaluating and transforming your procurement organization...
Where are there areas for improvement? Can implementing digital procurement tech make a difference?
Flexible companies can even introduce digital procurement technology that allows them to benefit from supplier social networks. Implementing a supplier social network in sourcing and supplier lifecycle management strengthens sourcing ability and supplier collaboration in even the most challenging circumstances.
The Benefits of Utilizing a Cognitive Supply Chain
As mentioned above, there are a wide variety of benefits to using automation and digital resources such as RedwoodConnect 2.0 to improve your supply chain agility. Cognitive analytics is a huge part of these systems. In fact, cognitive analytics is the driving force behind the technology that allows for optimization of inventory stocks, faster and more accurate demand forecasting, and capacity planning, and improved distribution and logistics management.
When all of these moving parts are streamlined and use the most accurate data to power the technologies connected to them, supply chain managers have a better overall real-time picture of everything happening in the supply chain. The more complete knowledge that managers have to work with, the more rapidly they are able to respond to issues, blocks, broken links, or breakdowns in the system.
With increased response times, supply chains become more agile and capable of handling even the most challenging global scenarios.