The last month by all accounts has been filled with some level of fear, trepidation, angst, and paralysis. Decisions that would typically be made over a year or a quarter period of time are made within a day due to the pandemic currently gripping our supply chains. The realization that the decisions and the actions we are taking has immediate consequences is being felt by all levels within an organization. The challenge is understanding the impact of a broad stroke of action and its impending spider web of reactions. The reactions create a multitude of various scenarios to work through to be able to project what next week, next month and, in some cases, tomorrow may bring.
Cases in point:
(1) When all motorized travel is shut down, the entire supply chain network to distribute fuel becomes obsolete. Oil fields halt production; Inbound oil shipments have no place to be hold inventory; Refineries have no place to store the finished products. The end game: production cuts dramatically impact the entire supply chains devoted to the distribution of oil & gas.
(2) The impact of the Coronavirus to China’s exports evolved with the extension of the Chinese New Year and the slow recovery to begin exporting. As a result, we had an influx of empty containers flooding U.S. ports with no ships to return them to China ports. Couple this with the lack of imported containers coming inland to the U.S., and empty containers began piling up at the ports. The result for many exporters was to pay over the road rates to move export shipments to the ports to be trans loaded onto empty containers.
“The recovery will take time. That
recovery time is the enemy for many
businesses supporting our supply chains.
There will be hardships and hardships
The supply chains sense and see the impact of broad stroke actions. Our challenge is foreseeing what the future holds, and begin taking action to reshape our processes to align with what we see for changes on the very near term horizon. Topics for discussion and potential action are listed below:
Electronic Bill of Lading
The time for paper documents is coming to a quick end. Paper proof of deliveries is archaic.
Driver Check-in Process
Social distancing has enforced this, and shippers should be aligned on how that the process becomes automated and geared toward safety for the driver and the shipping team.
Provider Due Diligence
As part of your onboarding process,
develop and perform a financial assessment on each asset carrier, non-asset carrier and logistics service provider’s financial standing. The assessment should include a process review of industries serviced, payables and management of receivables. The impact of the pandemic on our economy has been immediate. The recovery will take time. That recovery time is the enemy for many businesses supporting our supply chains. There will be hardships, and hardships cause defaults.
Shipment Execution Process Review
Conduct and map your current shipment processes to identify points of improvement and automation. The two points of discovery within the review should be optimal execution and touchpoints. The first question to answer is: “Does your execution process deliver optimal results for your
company at all levels of carrier capacity?” The second question: “Is your execution process integrated to
allow for automated inputs to your distribution team providing direction on optimal routing?” Our factory and warehouse floors are running on skeleton staffs. This may become the norm beyond the recovery phase as companies begin to gain their footing. Within our supply chains, resources have always been difficult to justify, and we should expect the justification to become even more stringent as companies look to keep expenses low. The answer: automate your processes to execute your supply chain.
There is still a great deal to learn about COVID-19. What we do know and are witnessing is the contagious nature of the virus. Short term actions taken by plant floors and distribution facilities to require distancing, proper sanitizing and preventive care is the new norm. Long term, the new norm is the design and application of the workforce within the facility. The workflow design is a critical element to be reviewed and analyzed to mitigate future breakouts of the virus into hot spots. Work cells may be enlarged, workflow may be changed to create employee space and additional shifts may be added to create distancing within the workforce. All are examples of reconditioning plant/warehouse design and workflow to mitigate exposure to employees.
Balance of Supply
Develop a Supplier Sourcing Model to confirm the links in your supply chain with a materials origin study that identifies risks within your supplier base. The study should identify the raw materials and components used by your supplier to provide the finished products for your business. This becomes critical as nearshoring becomes a potential path to mitigate risk. However, if the new supplier relies on the same supply chain, the risk to your business may still be there. The model will also help illustrate how vulnerable your supply chain is if the supplier is single-sourced and you have no qualified backup supplier.
Can your inventory planning system manage quicker equations &
rebalancing efforts? As we have seen with the pandemic, the move to an essential only market place drove higher demand versus supply on a number of products. We all know which one in particular. Can market conditions be incorporated into planning so reallocation of inventory to “hot” spots can drive greater sales volume?
Already strained on resource talent before the pandemic, the flow of talent may now be tilted in favor of the “essential” supply chains. Resource competition for industries identified as “non-essential” may now be at a greater disadvantage to land the best and brightest.