Supply Chain Strategy and the Post-pandemic World

Stephen DeAngelis

June 10, 2020

“Supply chains were ill-prepared for the pandemic,” writes Lora Cecere (@lcecere), founder of Supply Chain Insights.[1] She goes on to note, “The Global Risk Report published in January 2020 highlights the issue. … Based on data collected in the period of September-October 2019 from over 600 business leaders, at the start of the year, the likelihood of a pandemic was low risk. Let’s face it. COVID-19 took us by surprise. The risk management concern of business leaders in January 2020 was climate action failure. The design of the global supply chain at the start of the pandemic assumed frictionless borders, availability of transportation resources, and supply with few constraints.” Cecere’s remarks beg the question: What should your company’s supply chain strategy be going forward? Shash Anand (@shashanand), Vice President of Product Strategy at SOTI, asserts, “The COVID-19 pandemic has caused an enormous strain on global supply chains as they rush to complete and ship orders as quickly as possible. With tightening budgets and a need to stay connected using technology, it is more important than ever for transportation and logistics companies to have an effective mobility strategy in place.”[2] Logistics is not the only supply chain area that needs an effective strategy in place. The entire supply chain needs a thorough re-look. As John Leonard (@_JohnLeonard) notes, “Coronavirus has thrust a massive spanner into the normally smooth-running workings of global supply chains, leading to disruptions across the length and breadth of distribution networks.”[3]

What is supply chain strategy?

Strategy involves a plan of action or policy designed to achieve a major or overall aim. Scholars from the Academy for International Modern Studies (AIMS) define Supply Chain Strategy or Strategic Supply Chain Management as: “A strategy for how the supply chain will function in its environment to meet the goals of the organization’s business and organization strategies.”[4] They go to note, “There’s a kind of magic in some words, ‘strategy’ and ‘strategic’ being key examples. Place ‘strategic’ in front of the name of any business process and suddenly that process acquires an aura of great importance. Strategic objectives cry out to be achieved in a way that simple objectives do not.” In the following video, Dr. Simon Croom (@simoncroom), Professor of Supply Chain at the University of San Diego, provides an excellent overview of considerations that must be taken into account when a company develops a supply chain strategy.

The staff at Mr. Dashboard note, “Organizations that are serious about being competitive and gaining market share for the long term should ensure that they develop a well thought out supply chain strategy. A lot of persons tend to get confused about what is really a supply chain strategy. … It’s basically a strategy used to overview your whole supply chain. It can also be used to drive down operational cost and maximize efficiency within your supply chain. In the supply chain strategy you are going to plan out how you are going to work with distributors, customers and suppliers.”[5]

Post-pandemic supply chain strategy

Cecere observes, “Supply chain management as a discipline — a set of flows combining the processes of source, make and deliver together to drive value – is relatively new. The processes were first defined in 1982. As supply chain professionals, we have never managed the supply chain through a pandemic.” It follows that professionals have also never managed supply chains in a post-pandemic world. According to Cecere, “All of the disruptions to date had a predictable pattern: a devastating blow, a set of shock waves, and the re-establishment of a new normal. The new normal pattern appeared in months, and the supply chain adjusted. What is different in this pandemic is that we will not see a new normal until we get a vaccine or effective treatment (like we have seen with AIDS). Instead, we will ride wave-after-wave of disruption.” Hopefully, a vaccine (or vaccines) will be produced early in 2021 bringing an end to the waves of disruption predicted by Cecere. In the meantime, she writes, corporate supply chain strategies must be data driven. She explains, “The supply chain response will need to be a local-focused program using analytics to sense shifts market-by-market based on consumption data. Scrap traditional demand shaping programs. (The pre-COVID-19 programs for advertising, trade promotions, and price management based on history are ineffective.)” Anand agrees revised strategies must be data driven. He writes, “To adapt supply chain strategies, companies must have knowledge of existing technology, then determine which additional tools they must integrate to enable their current technology to support their new shipping needs.”

Here’s the rub. According to Cecere, “Getting data in today’s organization is difficult. The reasons are many.” She lists three areas making data-driven strategies unnecessarily difficult to implement. They are:

  • Design. “Organizations have many black holes. A black hole happens when data to answer a question is just not available. Most organizations have not designed their systems for data mining and discovery. Clouds, lakes, and streams need architecture to enable discovery.”
  • Latency. “Businesses also struggle with data availability at the speed of business. Data latency is a barrier to driving data discovery and building organizational alignment.”
  • Simulation. “The use of ‘what-if analysis,’ discrete event simulation, and digital twin modeling allows organizations to see the impact of potential decisions. The supply chain is a complex non-linear system. The future impact of choices is not apparent without visualization. Only one in three companies have this capability, and only one in two companies feel that they can tie S&OP planning to execution.”

Even though obtaining the right data may prove challenging, Cecere asserts, “The supply chain, as designed, is data-rich, but lacking insights. As the pandemic continues, and the world of gray unfolds, pattern recognition and the translation of data to improve decisions grows in importance, becoming more critical.” She suggests companies take the following five steps: Step 1. Stabilize Existing Systems; Step 2. Define an Outside-in Strategy; Step 3. Build Strong Relationships; Step 4. Drive Insights; and, Step 5. Invest in Sensing Capabilities. She concludes, “I am enjoying the evolution of supply chain technologies from innovators like Enterra Solutions, Expero, and Kroynos. If you are having a bad day, check out their websites. Consider pilots to overlay on top of your systems of record.” (Emphasis added for obvious reasons!) AIMS scholars conclude, “The supply chain has the overarching goal of providing customers with goods and services when they want them, at a competitive price, while being consistent with the organization’s and extended supply chain’s strategies. If the supply chain cannot successfully execute this supply chain strategy, the business, or product line, may cease to exist.” Many companies are currently in survival mode. A strong supply chain strategy will go a long way towards ensuring corporate survival.

Footnotes
[1] Lora Cecere, “Supply Chain Leaders Prepare For The Long Haul. Caution: It Will Be Gray.” Supply Chain Shaman, 2 June 2020.
[2] Shash Anand, “Adapting Supply Chain Strategies Amid COVID-19,” Inbound Logistics, 25 May 2020.
[3] John Leonard, “How the pandemic will change supply chain strategy,” Computing, 26 May 2020.
[4] Staff, “What is Supply Chain Strategy,” Academy for International Modern Studies.
[5] Staff, “What Is Supply Chain Strategy?” Mr. Dashboard.