Perhaps we had not realised quite how fragile our houses were until the metaphorical wolf appeared without warning and threatened to blow them down. As the UK comes out of Covid 19 lockdown, we can reflect, learn, and evolve, by identifying structural supply chain weaknesses. We can replace sticks and straw with stronger foundations and some solid bricks.
What was the impact of Covid 19 on the supply chain?
Covid 19 arrived without warning and many businesses were unprepared. Dependency on centralised Global Supply Chain models and low-cost production overseas, meant that when the factories in China closed, shortages were experienced across the world. Everything was affected, from raw materials to finished goods, from PPE to toilet rolls on the supermarket shelves. These all became difficult or impossible to source, pushing prices north.
Whilst large parts of the world are still fighting to control the spread of Covid-19, those Countries coming out of lockdown are beginning to look ahead. Now is the time to prepare for future events that could compromise Supply Chains again. These could be a new wave of Covid 19 infection (which the WHO believes to be a strong possibility) other unforeseen pandemics, Brexit, Climate Change, or Geopolitical tensions.
Building resilience into your business
To strengthen Supply Chains, businesses are now looking to balance cost control with risk. To achieve this, it’s key to measure the potential risk to supply against cost savings made when sourcing goods and materials from low cost Countries.
Reliance on just-in-time centralised supply chain models may have bought operational savings that businesses and consumers have historically benefited from but they also represent a measurable risk. With supply in a Globally destabilised climate like the one we have been experiencing during the Covid 19 crisis – the value of which can be translated into monetary terms through lost production and lost sales.
Reduce your risk
Here are some “risk-reducing” ideas to discuss with your supplier to reduce your exposure:
- Ask how their own sourcing has changed involving domestic and global procurement networks. See how they are spreading the risk of future interruptions in supply and production. Investigate the benefits of a Parallel Supply model. This works by increasing the percentage of goods produced and sourced locally, moving some of current reliance from off-shore sourcing to near-shore countries.
- Use new technologies to measure Supplier performance and risk. Sourcing and production from off-shore and near-shore countries needs to be properly tracked, certified and controlled. This will not only to reduce risk to Supply Chain availability and quality, but also protects against unethical practices such as exploitation of low-wage workers.
- Is your supplier taking practical steps to reassess their inventory? Replacing old stock with a supply of “business critical” goods in order to ride any future storms, satisfying customer demand until such time as sourcing and production can be near-shored or bought in country.
Business critical supply
Your provider should be able to demonstrate their ability to supply our customer’s through any new tough times that may be ahead, whilst continuing to offer value for money.
We also recommend that our customer’s look at what their “business critical” supply needs are to ensure good stocks are maintained. Where possible we would recommend that our customer’s keep some vital stock in local reserve. Talk to your provider about the following:
- providing product usage reporting to help you identify and forecast “business critical” supply requirements
- sharing the burden of storage, see if your supplier can hold your stock free of storage charges
- PPE for replenishment with consistent pricing and lead times
These are just a few of our thoughts on the subject of how to reboot Supply Chain after Covid 19, but we would love to have your feedback. Please send any comments or questions through using the form below.
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