It is very rare for a disaster to result in a global shutdown, with SMBs all over the globe asking their employees to stop working and stay at home to prevent further spread of the disease. Of all the areas that have been impacted by COVID-19, the effects are significantly prominent on supply chains across the globe. Those that deal with small inventories have the means to quickly scale back and reduce the impact that they face, whereas industries that primarily deal with a lot of inventory, are not as lucky.
However, regardless of the size of each player – inventories, manufacturers, suppliers, and consumers from all areas have been heavily impacted by this situation. For example, manufacturers in China are one of the biggest sources in the world for parts and finished goods. So as production slows down there, retailers and manufacturers from other regions that depend on these products would also have to slow down their processes or even put them on hold to match. Similarly, many businesses in China are important customers for SMBs from other countries. So they must now pause their manufacturing processes, since demand in China has dropped.
Read on to learn more about what you can do to help your supply chain before, during, and after the coronavirus.
Here are some measures you can take to prepare your supply chain for the crisis.
Plan for extreme possibilities
One of the most frustrating things about a crisis is that you do not know what to expect. When you do not know what to expect, the best way to prepare is by planning for the worst case scenario possible. For us right now, that means preparing to remain shut down until the virus is controlled, and then reopen with all hands on deck. Make sure you plan for situations that could be out of your control, like:
Running out of supplies and/or inventory. If your business depends on supplies from suppliers who are far away or heavily impacted by the crisis, then try to find other temporary suppliers or consider focusing your production on more accessible inventory.
A Service Level Agreement (SLA) breach is when a contract between a final consumer and a business has been broken. In the event of this happening, the customer must be notified so that they can factor in the costs involved and necessary legal actions can be taken.
Set up an emergency operation center
An emergency operation center (EOC) is a special facility or location that controls your disaster management activities during a crisis. An EOC can help you execute pre-planned strategies that you have for communication, decisions, roles, and actions that involve your suppliers, employees, and customers. It handles five main functions:
Command, which takes care of general response management.
Operations, which brings together all the functions in the business’s incident action plan.
Planning, which handles the collection, evaluation, and distribution of information, as well as managing the stages of the incident action plan.
Logistics, which is in charge of putting together the right personnel, services, facilities, material, and necessary equipment.
Finance, which monitors all monetary exchanges related to the crisis, like incident costs, landing costs, forecasts, payment for responders and contractors, and insurance claims.
Learn the ins and outs of your suppliers
Some of your suppliers are the starting point of your supply chain, and others depend on their own suppliers. During a crisis, you might not know which suppliers will be impacted and to what extent, but if they fit somewhere in your supply chain, then impacts to their business can have a ripple effect and affect your business as well. To prepare your business, do some research and learn more about your suppliers and their suppliers. You could also maintain a “risk list” of your suppliers’ inventory build geography and also of their suppliers. You can use this information to predict who might be affected, so that you can look for alternatives before a disruption happens.
Once you are prepared, you should now be ready to face the crisis. Here is what you can do to effectively respond.
Receive and convey accurate information
As with any crisis, it’s important to stay updated about the current situation that could be relevant to your business. Being a part of a supply chain requires you to know details like manufacturing operation status, port readiness, cargo movement availability, last mile delivery information, government assistance programs, lockdown instructions, and business schedules.
However, authorities who are trying to manage people’s anxiety and public behaviour may choose to limit the information they share. Luckily, you have other sources of information, like your local suppliers, customers, manufacturers, competitors, and other contacts in your local area. Communicating this information to your employees is just as important as receiving it, and transparency helps people make informed decisions.
Take precautions to meet consumer demand
Take the time to understand your customer demand, so that you do not end up turning away customers:
Start by working out an efficient demand-forecasting strategy, to help you make well-informed decisions. Stay in close contact with your suppliers to discuss your strategies for meeting demand. Consider refactoring your stock levels based on the current risk involved.
Forecasts keep changing, so update yourself with the latest information. Try to use an advanced forecasting tool that can give you real-time updates and keep you nimble.
Budget for surges in landing cost due to the strain on the supply chain.
Avoid changing the composition or size of your products.
Have information on alternate transportation routes and rethink same-day or next-day deliveries—they may become difficult to fulfill, and you do not want to give your customers false hope. Work on an optimized routing plan that can remove unnecessary delays from your deliveries.
Lastly, let us take a look at a few proactive steps that you can take now, to plan the future of your supply chain and make a quick recovery after the crisis has settled down.
In the aftermath of any disruption, it is extremely vital that you act fast. A common mistake in an emergency crisis is to scramble to close down, but forget to plan for reopening. So after the crisis has passed and they are back to work, they do not have the necessary assets to satisfy their customers demands. To prevent this, come up with a strategy to tackle your customers’ demands by reinvesting in your inventory, staff, and even equipment if necessary, before your customers move on to a seller who is better prepared.
Learn from the past
Since COVID-19 is not the first pandemic to leave a mark on businesses, here are some lessons that we can learn from previous pandemics.
Create a close-knit circle with your most reliable suppliers, customers, competitors, and authoritative groups like your local government, so that you can work on risk management together.
Look into supply chain risks with respect to procurement, authoritative, and managerial processes, by using standardized assessments and tools to evaluate them.
Work on better risk communication with all the stake holders in your supply chain throughout the crisis, from start to finish. Make sure that everyone is on the same page.
Educate your employees about following social distancing measures and procedures, such as no-touch deliveries and wearing contamination-reducing suits or uniforms.
Update your business continuity plan, factoring in all the risks that are associated with pandemics.
In a time of such confusion, it is important that you don’t panic, and instead remain calm and hopeful. What is equivalently important is that you are practical and well-prepared and with the COVID-19 looming over us, you should know exactly how it has affected supply chains so that you are ready.
Start by preparing for the impact by planning efficiently, considering your employees and their needs, putting together an EOC, and researching how your supplies reach you. Next, respond to the disruptions by getting accurate information about the current scenario so that you can act accordingly, and also educate your business of the same. Lastly, recover your supply chain from the aftermath by reinvesting in your assets as quickly as you can, and learning from past mistakes.