Supply Chain Risk Management - COVID 19
It’s now been around 10 weeks since China first reported the outbreak of the virus to the World Health...
The coronavirus is now officially an epidemic.
It’s now been around 10 weeks since China first reported the outbreak of the virus to the World Health Organisation. There are currently more than 126,000 cases worldwide and the virus is showing no visible signs of slowing. The United States has now halted travel from Europe to the US (with the exception of the United Kingdom for now) in a bid to combat the spread of the coronavirus. In this article, Supply Chain Digital explores McKinsey & Company’s “Implications for business” report and looks at the supply chain challenges companies face amidst the spread of the deadly virus.
During the opening weeks of the outbreak, there has been major concerns about the effect on supply chains that start or go through China. There have been many factory shutdowns and disruptions have been felt all over the supply chain during Q1. Trucking capacity to ship goods from factories to ports is at around 60-80% of normal capacity, with goods facing delays of around 8-10 days on their journey to ports. There remains an uncertainty around customer demand. Customers that have pre-booked logistics capacity may not be able to use it, while customers may compete for prioritisation in receiving a factory’s output, as well as the unpredictability of the timing and extent of demand rebound could cause confusing signals for a number of weeks.
To respond to the virus, McKinsey and Company has listed seven guidelines that companies should heed:
Protect your employees - Business as usual isn’t an option. Companies can find ways to support employees that are consistent with the most conservative guidelines that might apply and has trigger points for policy changes. Some organisations are actively benchmarking their efforts against others to determine the right policies and level of support for their people.
Set up a cross-functional COVID-19 response team - Businesses should nominate a direct report of the CEO to head up the effort and appoint members from all functions to assist. Team members should step out of their everyday roles and dedicate most of their time to virus response.
Ensure that liquidity is sufficient to weather the storm - Organisations must devise scenarios tailored to each individual context. This is because important variables will affect revenue and cost in different ways .
Stabilise the supply chain - Companies must work out the extent and likely duration of their supply chain exposure that are experiencing transmission, such as tier 1, 2 and 3 suppliers and inventory levels.
Stay close to your customers - Organisations that invest in their core customer segments and anticipate their behaviours are more likely to succeed. Companies should invest in online shopping for a range of products as part of a drive for omnichannel distribution
Practice the plan - Lots of top teams don’t understand the time required in working out the plan for disruptions. Companies should use tabletop simulations to define and verify their activation protocols for different phases of response.
Demonstrate purpose - Companies are only as robust as the communities they are part of. They should work out how to play their part and support response efforts, such as providing money, equipment and expertise.
Interested in reading more? Check out the full McKinsey and Company report here!
For more information on procurement, supply chain and logistics topics - please take a look at the latest edition of Supply Chain Digital magazine.
Pandora and IBM digitise jewellery supply chain
Pandora has overhauled its global supply chain in partnership with IBM amid an ecommerce sales boom for its hand-finished jewellery.
The company found international success offering customisable charm bracelets and other personalised jewellery though its chain of bricks and mortar retail destinations. But in 2020, as the COVID-19 outbreak forced physical stores to close, Pandora strengthened its omnichannel operations and doubled online sales.
A focus on customer experience included deploying IBM’s Sterling Order Management, increasing supply chain resiliency and safeguarding against disruption across the global value chain.
Pandora leverages IBM Sterling Order Management as the backbone it its omnichannel fulfilment, with Salesforce Commerce Cloud powering its ecommerce. Greater automation across its channels has boosted the jeweller’s sustainability credentials, IBM said, streamlining processes for more efficient delivery. It has also given in-store staff and virtual customer service representatives superior end-to-end visibility to better meet consumer needs.
Jim Cruickshank, VP of Digital Development & Retail Technology, Pandora, said the digital transformation journey has brought “digital and store technology closer together and closer to the customer”, highlighting how important the customer journey remains, even during unprecedented disruption.
"Our mission is about creating a personal experience and we've instituted massive platform changes with IBM Sterling and Salesforce to enable new digital-first capabilities that are much more individualised, localised and connected across channels and markets,” he added.
Pandora’s pivot to digital
The pandemic forced the doors closed at most of Pandora’s 2,700 retail locations. To remain competitive, it pivoted to online retail. Virtual queuing for stores and virtual product trials via augmented reality (AR) technology went someway to emulating the in-store experience and retail theatre that is the brand’s hallmark. Meanwhile digital investments in supply chain efficiency was central to delivering on consumer demand.
“Consumer behaviour has significantly shifted and will continue to evolve with businesses needing to quickly adapt to new preferences and needs,” said Kareem Yusuf, General Manager, AI Applications and Blockchain, IBM. “To address this shift, leading retailers like Pandora rely on innovation to increase their business agility by enabling and scaling sustainable supply chain operations using AI and cloud.”
Yusuf said Pandora’s success was indicative of how to remain competitive by “finding new ways to create differentiated customer experiences that protect their enterprises from disruptions to help mitigate risk and accelerate growth”.