The effects of COVID-19 on North American business are creating supply chain challenges into the second half of 2020. The ability for organizations to respond to these challenges will determine the strategies required to maintain profitable performance in 2021. Although some businesses relying on high contact and large crowds will succumb to bankruptcy, others have an opportunity to capitalize on new growth opportunities.
The booming e-commerce marketplace opens access to new segments of consumers seeking direct delivery on a growing list of staples previously procured through brick-and-mortar channels. Meanwhile, end users seeking personal protective equipment, sanitizers, cleaning supplies and other products required for contagion response will create new revenue streams for organizations nimble enough to shift supply chains and adjust processes to meet fluctuating demand.
Responding in this environment, executives who prioritize supply chain strategy will be best positioned to not only meet and exceed customer expectations, but also control costs that jeopardize bottom line profit.
Looking ahead to the remainder of 2020 here are five supply chain recommendations that can help you control business performance, even through the disruptions that are bound to happen in 2021 and beyond.
5 Supply Chain Recommendations to Control Business Performance 1. Treat the 2021 budget as a range and be prepared to adjust as conditions on the ground evolve.
In many ways budgeting will be a guessing game, and companies need to put together a plan based on contingencies. When revenue doesn’t meet expectations, have a plan for cost-cutting measures to implement. If earnings swing the other way, identify investments to make. Executive leaders must commit to evolving cost management so that scarce resources and funds consistently flow to the most valuable business outcomes.
2. Leverage supply chain resources to determine corporate impact (cost, service, risk) of plans produced by the other departments (sales, procurement etc.).
Experts working in supply chain possess analytical capabilities and a global picture of an organization’s total business. This supports acute awareness of the control levers that affect cost and service. When you put supply chain masters in the role of trusted advisor, they are in the best position to help executives and leadership boards navigate tumultuous waters.
3. Take a partnership approach with all relationships.
The supply chain is dependent on everyone succeeding. Often, by working with an expert supply chain partner, you can access end-to-end transparency that facilitates more opportunities across your network. That visibility allows you to be a better partner to your domestic and foreign vendors. With good clear communication around sales information, time-in-shipping data and other key performance indicators, you can help predict when you will need to reorder supplies and track trends that can help drive production guidelines. This supports a workflow that keeps your shelves stocked with the right items, and customers happy with the efficiencies of their orders.
4. Aggressively evaluate the entire supply chain and take an open-minded approach to the long-term structure.
Ensure the supply chain strategy aligns with corporate strategy – and leverage analysis and expertise to inform that strategy. This is especially important as e-commerce demands continue to drive increased expectations for flexibility in customers’ end delivery options. You may be shipping product out the door – but are you making any money on it?
5. Low water exposes a lot of rocks.
Take the opportunity to evaluate internal processes and systems. Balancing resiliency and efficiency, supply chain leaders can secure their networks. A recent Gartner survey revealed that only 21 percent of respondents believe their supply chain is resilient enough to provide “good visibility and the agility to shift sourcing, manufacturing and distribution activities around fairly rapidly.”
A global pandemic changed priorities for many supply chain leaders, elevating the agility of their network alongside the balance of service and cost. As Gartner points out, more than half of its survey respondents expect their supply networks to be “highly resilient” within two to three years.
Master Your 2021 Budget Planning
The first half of 2020 provided painful lessons for many organizations, some of which still face jeopardy. The businesses that quickly adapted to dramatic marketplace changes have often done so through an effective strategy for risk management.
Future success relies on your ability to assess potential risks that exist in your network and create alternative ways to plan demand response. Contingency planning today, especially in light of network weaknesses revealed in the past six months, will position your business to not only weather the storm but also seize growth opportunities.
While you are in the midst of managing your business, a supply chain master can provide the risk assessment and strategic planning required to establish a flexible responsive network. With that, you will always satisfy customers in the most cost-effective way.
John Richardson is Transportation Insight’s Supply Chain Master. For more than 20 years, he has designed personalized supply chain solutions that deliver optimal performance for organizations operating in diverse industries and geographies. John is an expert in transportation and network analysis, inventory optimization, supply chain simulation and data-driven forecasting. He regularly shares his insight with the marketplace at Transportation Insight’s blog.