The change in focus
In part two, Dave reveals further insights into how COVID-19 has impacted the supply chain industry, how small brands can take action, and what are the next steps. Need to catch up? Read part one.
Accurate forecasting has been the bedrock of supply chain management for decades but now with COVID-19 and the outbreak’s impact, all bets are off.
Instead of relying on daily or weekly updates, retailers now need real-time visibility of stock to hand, what’s in the supply chain, what the lead times are and so on.
Today, retailers and manufacturers need to know exactly what stock is being consumed and what stock is coming in based on an entirely new set of assumptions.
Take yeast, as an example. Yeast is largely unavailable in stores apparently because we are all making bread (or perhaps homebrewing). Retail outlets have been caught by an overnight phenomenon that has changed buyer behaviour.
Understanding the drivers to these emerging consumption trends will help unlock prognostication insights for other related supply demand.
The best protection to under/oversupply oscillation is tighter consolidation across the supply chain. In New Zealand, the faster moving parts of the supply chain tend to be EDI or API enabled and can react to rapid changes in the market. But the further you get from the likes of our biggest grocery retailers, the closer you get to pen and paper.
Manual processes are also real in our larger national carriers who have end-to-end visibility of events and a close to real-time view of the changing state of the market.
The best systems are integrated from order-to-cash, and cover all critical commercial and logistics events, like:
- Customer order (CRM and ERP)
- Stock management (WMS)
- Logistics and exception management (FMS and TMS)
- Invoice management (ERP)
- Great visualisation (BI Tools).
An integrated system must cover the internal system and third party logistics (3PL) suppliers, and robust and reliable integration tools and capabilities are crucial to deal with both external (customer and 3PL) and internal transactions. Tighter integration is a must if businesses want to limit the under/oversupply oscillation evident during this pandemic.
If you’re a part of a larger supply chain and you don’t have direct a connection to the end consumer, don’t presume anything. Try and get daily updates on the changes from the sales teams, as they will likely have the best real-time sense of where and how market demand is moving.
The other consequence will be the pressure on smaller suppliers. The last few years have seen a massive expansion in the number of brands available in supermarkets, driving both innovation and price. Many of these smaller suppliers, even the more traditional suppliers like butcheries or bakeries, may struggle to maintain their supply chain. This reduces choice on the shelf and the drive for product innovation – something that has traditionally been led by smaller retailers and suppliers.
How small brands can take action
The first option for these manufacturing start-ups and small-to-medium enterprises (SMEs) should be an aggressive move into a digital transformation programme.
An online retail environment and a backorder support programme will become your lifeblood in the months ahead. If you have a strong, supportive customer base, use it, as they will be invested in your survival. Get cash now for a discounted product as soon as production restarts. Already, we have started to see smaller brands, with strong customer loyalty, issue gift certificates for redemption as normality resumes. Note: 19 per cent of gift certificates are never redeemed.
New handling regulation: trust is the new black
Hazard Analyses as Critical Control Points (HACCP) has been around for many years and was first devised by NASA to keep food for astronauts safe. This system has been used in the food supply chain across New Zealand for years.
Over the next few months, we are likely to see the introduction of new handling regulations for food. New Zealand as a ‘business’ needs to be ahead of this so it can look after our people and create the short-term jobs that will be required. Right now, discussions are going on across the government and industry on how we set up for the long climb out.
New Zealand's supply chain largely operates a 'just-in-time' model and is optimised by holding minimal stock in the supply chain. Any change in terms of safety systems will be challenging and could take some time. There will need to be higher levels of batch traceability and management for manufacturing and carriers. Farmers will need to invest to meet higher levels in National Animal Identification and Tracing (NAIT) and customers (retailers and manufacturers) will need to be able to access this new information.
Over the next few weeks, Datacom and our partners will be working on solutions to these critical issues.
The next steps
- Get connected and stay connected. Get real-time data and event visibility so you know what is going on and where it’s going on, not month-to-month, but hour-to-hour
- Explore your online trading options. Get online and start trading if you can. Even if you can’t supply right now, get the money in, or at least test your product/service receptivity with your market and gain first-mover advantage as normalcy resumes
- And finally, think of the next two weeks and the next two years. When we recover, New Zealand will be very different; our jobs will be different, and our export markets will change.
The world in which we live is facing levels of disruption not seen for generations. This places huge pressure on the supply chain. Prepare your business in a better, more effective way and build resilience into your planning.
We’ve learnt a lot about the world’s systems and supply chain because of COVID-19 but it’s not the only issue we face. How prepared are you for the further inevitable oscillations in supply and demand matching over the coming weeks, months and even possibly years?
This is part two of a two-part blog.
Follow Dave on LinkedIn for more insights on supply chain or get in touch for qualified guidance on getting your supply chain back up to speed.