Avoiding Supply Chain Disruption as the Pandemic Evolves
Innovation is playing an essential role in supply chains as manufacturers, distributors and retailers strive to adapt to the evolving COVID-19 pandemic and the extraordinary levels of disruption it has caused. Ongoing volatility in supply and demand across many sectors has increased the need for companies to ensure they implement flexible, agile, resilient and high-performing supply chains using advanced technologies. According to our into business resiliency during the pandemic, the survey showed that 60% of businesses were impacted by supply chain disruptions during the pandemic.
Improved Resilience Through Supply Chain Visibility
The pandemic is now impacting the lateness of deliveries, and this problem is only expected to get worse as many countries undergo a second wave of COVID-19. With the increasing shortages of parts and ingredients, global manufacturers have had to identify alternative suppliers and are adapting their supply chains to make up for fluctuating demand for deliveries.
By implementing a digitally-enabled Enterprise Resource Planning (ERP) system that gives them greater visibility across their supply chain, especially inventory levels at the critical stages, procurement teams can play a significant role in solving supply chain challenges. Their focus should be on calculating demand more accurately, posting new tenders and ensuring that the right levels of inventory, parts and raw materials are ordered and delivered, in the right quantities and at the right price.
Supply Chain Collaboration for Supermarkets
Australia’s supermarkets have experienced unprecedented demand for groceries in the last eight months, both in-store and online, which has led to shortages of some products and severe disruption to online delivery services.
(ACCC) granted interim authorisation allowing Australian supermarkets, Coles, Woolworths, Aldi and Metcash, to coordinate with each other when working with manufacturers, suppliers and transport and logistics providers. Originally granted in March, the to continue cooperating to ensure the supply of food and groceries in response to the COVID-19 pandemic by the ACCC.
To further improve their resilience, some supermarkets have changed their linear supply chains into an expanded network of stakeholders. This has allowed them to diversify their procurement mix and supply chains and reduce their dependence on any single country or supplier. Through ERP integration with their network of stakeholders, representatives from different supplier companies can interact on a single platform, improving the flow and availability of information and improving the reliability of on-time deliveries.
The supermarkets and their suppliers and distributors have had to quickly adapt so they can manage disruption by developing predictive models for proactive scheduling and dynamic planning of supply with careful consideration of the uncertainties and risks. This is helping to kick off the next stage of digital transformation as many of the supermarket suppliers are now prioritising supply chain digitalisation.
However, as things evolve over time in response to the pandemic, manufacturers will come under increasing pressure to improve delivery while remaining competitive. While many of the supermarkets can closely track their tier-one suppliers, many are unaware of the full extent of their complex global supply chains and are having a major rethink about their global supply chain strategies.
Reimagining Supermarket Deliveries
Woolworths has become the . Its new Micro-fulfilment technology helps dispatch five times the online order volume of a standard Woolworths store. This will dramatically improve the speed, efficiency and accuracy of the picking process at its Distribution Centres, allowing it to increase online deliveries. Woolworths’ online orders have more than doubled in Victoria in 2020 as strict lockdown measures have forced its citizens to stay home and socially distance since July.
. The 2400sqm space in Carrum Downs uses automated storage units to bring grocery items to order pickers rather than them walking the aisles. The units can hold up to 10,000 of the most in-demand grocery products, while fresh fruit and vegetables and meat products are still picked from the store by humans.
in Australia’s largest capital cities, Melbourne and Sydney. These centres will be highly efficient and are underpinned by AI, algorithms and machine learning. This will help to improve product availability, better pick accuracy, enhanced online capability at a lower cost to serve and more regular delivery windows.
Coles is adopting a centralised approach by building two new fulfilment centres in our capital cities, whereas Woolworths believes that supermarkets will become smaller and products will be automated, so they believe that micro-fulfilments in the back of larger stores is the best method to speed up deliveries.
Switching the Supply Chain
A transformed understanding of supply chains is going to be one of the more positive and lasting impacts of the COVID-19 pandemic. It has been a catalyst to a rethink of supply strategies and inventory management to iron out the vulnerabilities this pandemic has highlighted in many companies’ supply chains.
Those manufacturers that have already implemented digital supply chain technologies will be reaping significant rewards now, in terms of the ability to foresee issues with their supply chain that has enabled them to switch their suppliers quickly. A positive outcome of this pandemic is that it has forced all manufacturers, distributors and retailers to accelerate their move to the next level of digital transformation.
Rob Stummer is the Melbourne based CEO for SYSPRO APAC. With nearly 20 years of leadership roles, Rob is a senior technology industry leader who enjoys finding a vision through the application of relevant technology, creating a strategy with purpose, and then connecting people through collaboration, engagement and open communication.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”