There is an abject shortage of on-field workers during the Coronavirus pandemic. Due to this, supply chains are faltering. Your preparedness will define success for your e-commerce. Therefore, you have to pinpoint the problem areas and take rapid action for the efficient supply chain management. Business managers have to optimize overall production and distribution to ensure customer satisfaction.
What is the supply chain?
A company and its suppliers work closely to produce and, eventually, distribute the final product to respective buyers. This process requires a wide range of inputs. For example, people, entities, information, resources, and activities, to name just a few. All these inputs are collectively known as the supply chain.
Supply chain managers primarily help in exercising cost control and fastening production cycles. Thus, e-commerce businesses remain competitive.
Structure of supply chains
The whole set of inputs we talked about earlier belong to two collections: upstream and downstream. Activities that consume materials are upstream activities. In contrast, the ones who drive the output of materials are downstream activities.
Suppliers belong to the upstream activities. Suppliers are classified as follows:
- First-tier suppliers provide materials directly to the operations.
- Second-tier suppliers send materials to first-tier suppliers.
- Third-tier suppliers provide materials to second-tier suppliers.
The cycle goes on until the source of materials. Supply chain managers decide upon the size and shape of supply chains. These decisions include the number and size of facilities, its operations, location, and stock at each site. Furthermore, they also look after transportation.
Problem areas in the supply chains
Supply chains can be affected by a variety of problems classified as follows.
1. Financial requirements
In certain instances, you might require extra money inputs. Budget overruns and missed deadlines lead to such problems. In fact, such situations are common right now. Therefore, to avoid such problems, strict regulations, market forecasting, and accountable supply chain management.
2. Risks associated with work timeline
Lack of proper planning affects the schedule of the production process. Meanwhile, this disruption can lead to budgeting issues. Natural disasters, delays due to a lack of supplier’s professionalism and transport chain disruption can cause such problems.
3. Issues of legality
Such matters have broader implications, such as loss of time and capital. Legal disputes can go for longer than anticipated. Ordinarily, issues related to misuse of intellectual property or non-compliance of terms and conditions cause such risks. It is best to adhere to the terms of the documents to avoid such losses.
4. Risks associated with environmental impact
Each stage of production can generate a considerable amount of environmental impact. Adverse effects on the environment, such as waste disposal and effluent discharge, should be considered while optimizing the production process.
5. Societal risks
Due to changes in political or societal regime, businesses need to adapt to new market conditions. Solutions for this category of risks requires efforts and can be capital intensive.
6. Organizational risks
Such risks arise due to a lack of skilled laborers and appropriate machinery.
7. Behavioral risks
Behavioral risks are complex to understand. These issues occur due to the unavailability of key personnel and poor decision-making.
How to perform supply chain management?
Supply chain risk management starts with two fundamental analysis: measuring the extent and likely duration of the risk before us. This step is necessary for stabilization because your suppliers cover vast areas with varying degrees of Coronavirus transmission.
Once operations restart, start by maintaining a wide-angle view and strategize accordingly. Begin with prebooking logistics like transport facilities and determining the use of stocks. With this in mind, try to get into the high-priority list for your suppliers.
Look out for scenarios that can affect your sales strategy and then waste no time to adapt to those scenarios. This process will require a team: team manager, supply chain analyst, regional managers, and logistics managers.
A 6-way action plan for supply chain management
Supply chain risk management has several steps—the first of this being stabilization, which calls for a short-term supply stabilization strategy. The following 6-way action plan will help each area hit hard by the Coronavirus pandemic.
1. Assess risk-prone areas of the supply chain
At first, analyze your supplier network, tier-by-tier. Identify the suppliers who give you the components necessary for your operations. Afterward, you can design your strategy around these critical performers. After risk-indexing, make a layout of which of suppliers from high-risk areas for each tier. Try to substitute them with possible options.
Be transparent with your suppliers and, in turn, ask them for the same. Transparency will help you pick the safest network of suppliers to keep your business running. Eventually, a joint agreement with your suppliers will streamline the process. Your end goal in this step is to keep lead times and inventory in check.
Instead of manual planning, use the triangulation method. Use various factors to understand the extent of risk a supplier poses. For illustration, use industry exposure or shipment impact to make your decision. Advanced analytics and network mapping give you unbeatable insight for supply chain risk management.
Keep a list of alternate suppliers handy at all times. As a result, you can optimize costs and also increase production speed. Besides, ask regional managers to monitor policy alignment to avoid any unforeseen delays.
2. Evaluate inventory
There is so much inventory you let out in the supply chain. Make a note of that so you can keep the production running. Do this simultaneously with risk-indexing done in the previous step. This step will let you decide on the production capacity you require. Consider the following types of goods while evaluating your inventory.
- The finished goods held in warehouses.
- Any blocked inventory held for QC or testing.
- Spare parts for refurbishing.
- Parts that didn’t perform well in QC or testing. Rework them to address quality issues.
- Parts currently in transit and methods to accelerate them.
- Supplies held with dealers.
3. Assess customer demand
Consumer behavior changes prominently during a crisis such as Coronavirus. Due to this, businesses need to perform extensive customer demand analysis.
Data sources can forecast such changes in demand. However, in most cases, they fail to depict the underlying uncertainties. This uncertainty can drive your supply chain management to shreds. With this in mind, you have to forecast demands, both short-term and medium-term, using data analytics tools that are readily available.
It is preferable to keep in mind that conditions are ever-evolving. Your demand forecast can develop a few loopholes. Thus, you have to use a variety of tools to assess the market situation. To illustrate, you can use advanced statistical tools. A dynamic market analysis can help you deal with inaccuracies.
4. Optimize your manufacturing and delivery units
Demand forecasts and secure supplier networks define your background work. Next, you have to set the ball rolling. Optimize your production units and prepare the delivery units for timely distribution.
Firstly, consider all the methods you can use. For example, form a crisis communication team and discuss work from home for employees. The unsafe environment can heavily compromise work output. Keeping an eye for such concerns ensures optimal process flow.
Secondly, think about how you can manage the current demand with the current manufacturing capacity. Prioritize the products according to the ongoing demand forecast and value. For illustration, during the Coronavirus pandemic, the need for healthcare products and packaged food has spiked.
Moreover, consider the requirements of customers once the recovery starts. After that, set off the marketing, operations, and supply chain teams to work together and handle the impact on your business.
5. Manage your logistics
The current market situation demands timely action. From production to product distribution, logistics planning is the key. As e-commerce, investigate your current capacity as well as future requirements.
Don’t put off the logistics acquirement till you get the production rolling. Rather, prebook logistics. As a result, you can avoid cost hikes in times of increased demand for facilities such as transportation.
The crisis management team can best perform its function if you monitor the movement of shipments. Problems like transit issues can have adverse effects any day. By keeping a close eye on such changes, you can handle situational hazards well.
6. Manage capital
Due to various crises, money depletes rapidly. Here you need to prepare for the worst. Therefore, your e-commerce business will require regular effective forecasting. For this, you will have to free up cash. To reduce pressure on capital, start weekly and monthly forecasting.
Supply chain managers can help this process immensely. They can free up cash stuck in various parts of the supply chain. Targeted sale of the finished goods inventory will save vast amounts of capital. Smarter logistics maintenance helps too. Increased production of essential goods can result in immediate cash flow.
To manage capital, the best method is starting consumption-based stocking. However, significantly favorable contract terms help in savings too.
How to maintain supply chain preparedness for the future?
A business’s success depends on its adaptability and preparedness. The following measures can prove useful in achieving this goal.
1. Become a proud user of digital platforms
Transform large sections of your supply chain using digital platforms. Digitization helps operations managers in maintaining efficiency. Technologies like the Internet of Things, AI, Machine learning, and analytics help support an evolving supply chain.
For instance, data analytics helps in identifying all possible supply chain networks that offer the least disruptions. Such platforms also help in the coordination of the whole team. AI can be suggestive of measures that can smoothen the supply chain too.
2. Form a crisis management team
These digital tools offer a multitude of information. Form a crisis management team that can take action by forecasting. These data sets will help the team take rapid action on possible disruptions.
The team will monitor the supply chain 24*7. Thus, it will identify factors that are disruptive. Business managers will then find alternatives and put them on hold in case of a distress signal. For efficiency in the team’s work, cross-functional communication and coordination are crucial.
Supply chain management is essential during crises such as COVID-19 and natural disasters like a tsunami or an earthquake. The key to performing well in such times is preparedness and creative decision-making. The way you help your customers in such times define their loyalty towards you.
It is essential to understand how consumer behavior shifts during such crises. Only when you adapt to such situations, you can grow as a brand. Therefore, use predictive analytics to look for problem areas and try to anticipate them beforehand. Many tools can help you facilitate that. Don’t wait for last-minute action plans. In the end, every second wasted is money wasted for your business.
At Datahut we’ve worked with numerous clients on their e-commerce data needs. In case you are curious about how web data can help you transform your business’s supply chain management during such tumultuous times, get in touch.