Post Covid19 Supply chain strategies

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“Intelligence is the ability to adapt to change”.” ~STEPHEN HAWKING

Darwin’s theory of evolution implies that a new change arises by evolution in the existing species over a period. This used to be associated with biological species, however the same can be linked to the changes the Retail sector is experiencing post the pandemic.

A viral infection that started spreading in late 2019 went across the globe and this generation experienced its first-ever Global pandemic post Spanish flu outbreak in 1918. Countries shutting off their borders, large scale curfews, global markets getting closed, businesses shutting down and people being confined to their homes to prevent the spread of SARS-CoV-2 more commonly known as COVID-19. The human population is now trying to live with this pandemic and many businesses have started operating though at less workforce than pre-COVID times.

It is not just our day to day lives that were impacted by COVID 19 but a several business models were shook to its core as no one thought we would be experiencing a disruption so huge that everything will be shut off. Business segments that were the kings of the market were on the receiving end of this major impact. With strict lockdown across the countries, businesses faced the toughest challenge they ever could with depleting cash flows, stores shutting down, sales getting down and financial problems deepening.

In the USA alone almost 400 companies in retail filed for bankruptcy. As per the data by the American Bankruptcy Institute, the total commercial Chapter 11 filings surged 26% compared to last year during the first 6 months of 2020. With all these challenges being faced by the industry one must look at it from a learning point view as well. There is no denying the fact that every industry faced a huge blow during this pandemic but was also served a chance to develop and upgrade its processes to better align themselves with the ever-changing business environment.

Now that we have started living with the virus among us several of the Retail and FMCG companies have upgraded the way of doing business to recover from the setback and to be better prepared for such global disruptions in the future. It is not like these companies were not up for improving their supply chains and operation before COVID, there have been several initiatives that were taken to provide better service to the customer in past as well. However, now the focus has become laser-sharp to improve supply chains & operations and thus striving to be successful in such times as well.

Some examples of such initiatives majorly lie in the following segments

1. Business continuity plan
A business continuity plan sets systems and processes in place to prevent and recover from any danger or potential threats to the business. The idea is to enable current operations to function before and during such incidents. This can be bifurcated into five steps:

Business Continuity Plan FLow

• Assess what impacts your business
• Planning and designing a strategy suitable for your business to enable ongoing operations by defining key objectives and risk
• Implementation of the strategy finalized
• Test the resilience, recovery, and risk management of the implemented strategy by drills and simulating real life scenarios.
• Incorporating business strategy changes into the continuity plan and to have a sustaining resilience to recover better from the setbacks.

2. Omnichannel approach
A lot of focus change can be seen in major FMCG companies who are moving from traditional general trade to their e-commerce websites or existing online market places. With companies like Dabur who is launching an online- only ayurvedic product line to Marico who is also set to launch an online-first set of products before making them available in the traditional retail market. The idea is to ensure continuous service to the consumer and providing ease to shop. The current COVID19 outbreak pushed a lot of traditional small- and large-scale companies to bring their attention to increasing their presence online. With synergies of offline and online retail options, continuous service to customers can be maintained and it can in turn ensure continuity of cash flow and business.

3. Supplier Base expansion
Traditionally a lot of companies depend heavily on a concentrated set of suppliers who in turn have a limited supply base. The present times have taught us that is it important to expand the supplier base to a ensure consistent supply of products and services. During late 2019 when China closed its borders due to COVID 19, a lot of companies were left dry of raw material. This led to a revolution to reduce the dependency on China for goods and services. In India, under the “Aatma Nirbhar Bharat” campaign many local companies started PPE kits and N95 mask production which before 2020 were imported from China. Similarly, a lot of local partners can be incorporated as alternative suppliers for key items thus making providing a cushion to supply shocks in the future.

4. Inventory calibration and safety stock management
Safety stock as the name suggests is the extra stock that is maintained to mitigate the impacts of demand and supply variations. Although the concept of safety stock results in slightly excess inventory at different points in the supply chain and higher capital being locked, it does shield from the sudden supply shocks. Inventory management strategies like JIT and Lean manufacturing focus on reducing the inventory at various points in the supply chain and thus saves the cost of inventory but one must weigh the cost savings in these cases with the possibility of a loss of revenue & disruptions due to shortages in supply. With a proper study of a company’s supply chain and requirements, safety stock can be managed with a focus on keeping the cost of inventory efficient.

It surely is a little early to just bombard the existing supply chains with all these novel and practiced concepts that are available in the present times. However, a systematic approach to improve the flexibility and efficiency of the same can be taken to safeguard the supply chains from such shocks in the future.

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