COVID-19: five priorities for retail supply chain
As COVID-19 continues to impact supply chains, we take a look at the five prority areas in which retail supply chains are taking action to mitigate the risks.
AS the COVID-19 pandemic continues to spread, retailers have stepped up their efforts when it comes to providing consumers with essential goods and to protect the health and well-being of communities.
In order to achieve this retail supply chains are facing challenges that require extraordinary measures to ensure that essential goods continue to be delivered to stores and consumer doorsteps. To mitigate the short term fallout, supply chain leaders are creating transparency and building rapid response capabilities.
Research on consumer spend amidst the outbreak:
With the supply chain industry facing several challenges, including shifting customer demand, restrictions and potential material shortages, the outbreak has forced many to rapidly adapt their supply chains.
Due to surging demand for essential non-discretionary goods, retailers are facing network-wide shortages. To combat this retailers are working closely with companies across their supplier bases.
For the most important products, daily meetings are being held with strategic suppliers to work through the options for securing an adequate supply of essential high-demand items. This is the first and foremost priority for those in the food, drug and mass (FDM) categories, to secure a fast and reliable supply.
Simplifying SKU profiles to reduce variety and boost quantities
Easing payment terms
Widening delivery-appointment windows
Relaxing on time and in full (OTIF) requirements
With retailers looking to recalibrate their product orders to be in line with customer demand, they will also need to feed the change across their purchasing, planning and inventory management operations.
Revising purchasing plans favouring items in high demand
Directing inventories towards locations where sales are particularly active
Bypass or override inventory replenishment and inventory allocation algorithms
Reassign merchandising operations staff
Reassigning in-store marketing budgets to build operational flexibility for essential items
Relocating inventory already owned to conserve cash
In this part of the supply chain, distribution is where demand trends for non-discretionary and discretionary goods start to overlap significantly.
Reassignment of employees to increase capacity
Cross-training and reassigning back-office and store personnel
Temporary movement of office works into distribution centers
Staggering shifts to maintain worker health and safety as well as improve retention and reduce turnover
Suspending operations between shifts to deep clean distribution centers
Conducting health screenings
More so than ever before, maintaining flexibility within logistics is essential. The current surge in demand is slowing consuming the excess capabilities.
Bypassing distribution centers and ship goods directly to stores and simplifying assortments and packaging processes putting speed ahead of product variety.
Supplementing non-discretionary transportation capacity via partnership with under used discretionary goods transportation fleets
Due to self-isolation, quarantining and stay-at-home orders emerging as a result of the pandemic, companies are seeing a notable increase in online shopping and local deliveries for non-discretionary goods.
Widening delivery windows from immediate or same day delivery, to two or three day delivery, in order to give retailers time to rationalise the scheduling and routing of deliveries in order to save time and mileage
Converting some outlets to ‘dark stores’,to compensate for the decline in store traffic
Hiring full-service shoppers
Temporarily shifting in-store employees to delivery jobs
Lower online order size to qualify for free shipments and relaxing return windows to provide more flexibility for customers
Capping purchases of high demand products
Reserving periods of the day for high-risk shoppers, as well as for cleaning and sanitising the store
Shortening the stores opening hours
For more information on procurement, supply chain and logistics topics - please take a look at the latest edition of Supply Chain Digital magazine.
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.”