How Can Supply Chains Prepare for the “Next Normal”?

Uncertainty is high in Planning and Forecasting with changes to asset management plans being the key driver. This requires extreme flexibility with options when things change.

The keys to success will be identifying options to accelerate or delay work to control costs, revise asset management plans, and account for changes in labor productivity and availability. Close coordination and cooperation between business units, procurement, vendors, and customers will be needed to identify and capture opportunities.

• Adhere to the “rule of three” by ensuring collaboration with the three primary stakeholders—the business, procurement, and suppliers. This is especially true for complex spend categories.

• Update governance so it is sufficiently cross-functional and includes groups like finance to account for the changes between capital projects and maintenance.
• Update process and procedure documentation to recognize and respond to changes.

Risk management is a heightened driver in strategic procurement, and it brings with it a requirement to work collaboratively to review total cost beyond unit pricing. It also emphasizes development of sources geographically closer to the point they will be used. Additionally, risk management will reach upstream to bring to light labor and global supply chain risks in supply chains of suppliers. With new sources of supply, quality assurance and control must be maintained.

• Evaluate spend, market, and supplier analyses that will be inputs into sourcing strategy development and refresh.
• Incorporate a robust risk management framework to account for the new risks elucidated by COVID-19.
• Collaborate with vendors to understand information about raw materials, component manufacturers, and risk in these upstream supply chains.

A leading practices service delivery model for Operational Procurement has become increasingly vital during the COVID-19 pandemic. Among other benefits, this model enables remote work by allowing the right people to have the right access to the right information and for customers and suppliers to continue working “like before” with supply chain.

A leading practices service delivery model also facilitates access to supply chain services for vendors and internal customers through a portal and service center supported by a knowledgebase while providing better allocation of work to resources. Even in a WFH environment, transactional work can proceed “almost as normal,” complex issues can be escalated to specialists, and emerging strategic opportunities can be identified and routed to strategic procurement.

• Consider the functionality of a procurement landing page, knowledgebase, and customer relationship management application so customers can have direct access to service and information and work can be routed more efficiently and transparently.
• Ensure that work activities in operational procurement are aligned with skills for more efficient and effective completion and to protect important work from being pushed aside by the urgent.

New requirements for getting the work done will impact collective agreements and require collaboration to address. Third-party logistics providers will be worthy of re-examination as competitive positioning changes due to social distancing and quarantine restrictions.

• Review arrangements with outsourced logistics providers to ensure they can continue to provide good service while meeting new requirements.
• Consider the logistical impact of onshoring or localizing more supply, which is increasingly common to support local economic development and reduce supply risk.
• New demands from the business mean a new mix of shipments in the network, so consider re-optimizing to maintain the best service and lowest cost.

In Materials Management, the movement of materials is further complicated by new restrictions and changes in priorities. Warehousing and distribution staff will require training to comply with new social distancing and quarantine restrictions, and cross-training will be more important to mitigate the risk to operations of unavailable staff.

In general, social distancing is making some operations more difficult and time-consuming. Meanwhile, inventory—the purpose of which is to more efficiently and reliably meet needs in the network—is exceeding or underperforming desired service levels as fundamentals like demand and delivery times change.

• Review inventory levels and associated criteria for purchasing and stocking to make sure levels are set to meet new service needs at the right cost.
• Consider changes to warehouse locations and layouts to improve operations and quality as new material flows emerge in the network.
• Update safety, training, and workforce management assumptions to keep staff productive and safe in the new environment.

Suppliers are also coping with WFH requirements. This can create more questions, lengthen response times, and complicate dispute resolution. Emphasizing the use of richer communication channels (e.g., video chats) for internal team meetings and supplier sessions can improve the effectiveness of AP.

• Deploy tools to support direct access such as portals, knowledgebases, and customer relationship management applications, providing quicker service for the AP team, suppliers, and internal customers.
• Develop or accelerate plans to become fully paperless to support reduced touches and errors while further enabling WFH options.
• Work with selected suppliers who are at-risk and consider paying them sooner to help support them through the pandemic.

The CFO of a company with $6 billion in annual sales was confronted with an earnings challenge due to revenue declines associated with COVID-19. This executive asked operational leaders in the business to work with supply chain to find strategic cost-reduction opportunities that could help preserve earnings guidance. ScottMadden helped develop plans to capture more than $150 million in savings.

The CEO of a national power and water utility made significant changes in maintenance plans due to the economic and labor impacts of the pandemic. This executive asked operations and maintenance to collaborate with supply chain on their plans. ScottMadden helped integrate the organizations to ensure materials were available to address emergent and scheduled work.

The chief supply officer at a $7 billion company implemented a tiered service delivery model shortly before COVID-19 with help from ScottMadden. The pandemic created increases in demand, supply disruptions, and an influx of business inquiries with shifts in job requirements. Because of the new service delivery model, this client responded faster and with greater effectiveness, even while working from home, than was previously possible.

Multiple leaders sit on supply chain governance councils, which have varying mandates, from sharing vendor information to advising the governments on critical infrastructure that should be covered under the Defense Production Act or stockpiled to lessen the effect of future pandemics. ScottMadden supports these clients in identifying, understanding, and mitigating risks.