There are a range of strategic responses for supply chain leaders can take
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Brendan Richards
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Transport and logistics operators must keep delivering food and products throughout the coronavirus (Covid-19) pandemic, however, it won’t be business as usual. There are new issues to face now, and considerations to make for the future.
As essential services, transport, logistics and supply chain operators must continue to function throughout the Covid-19 crisis, operators are under pressure to deliver, while also navigating fast-changing consumer demands and new regulatory constraints.
Border closures will mean reduced access to international air/shipping freight and potentially delay and bottleneck the flow of goods throughout domestic road/rail networks.
There is a real need for industry and government leadership to remove any factors that might slow down or impact on freight moved across the country.
There are immediate impacts that must be managed now, and longer-term impacts to consider beyond the crisis.
Short-term strategies
In the short-term, supply chain operators can:
- Manage logistics shortages – The freight and logistics sector has already quickly sought temporary solutions to the current increase in demand for local drivers, international air and sea freight capacity.
- Unlock capacity at speed – Some organisations will struggle to access the freight they need throughout the crisis. To overcome this, there is potential to collaborate and consolidate with other companies that have similar products or customers. For those that can’t supply goods to their normal markets, there is potential to consider expanding into new markets that could last into the future.
- Run and analyse new network scenarios to determine the impact or reshaping of supply chains that would be required should existing disruptions continue for a long period or new challenges emerge (e.g. if local and global suppliers stop manufacturing, transport routes close or slow down, pandemic pushes into the full calendar year).
- Monitor other important regions for impacts to existing third-party contractors (e.g. customer service operations outsourced to India or South East Asia where they may become unavailable).
- Identify alternative sources of supply and where new suppliers are identified, analyse the network changes through simulation of the supply chain to understand the impacts on working capital, cost-to-serve, supply chain risk, lead times and DIFOT levels, before accepting these new network changes and updating any BOMs/ERP records.
- Review and further develop ongoing risk monitoring and network simulation – Investment into digital supply chain enablers will help to predict and proactively mitigate supply chain disruptions.
- Be ready for spikes in demand for household goods. As consumers panic-buy and clear shelves of items such as toilet paper, manufacturers have been increasing output to match. The excess stock needs to get into stores quickly, and supply chain operators must have the human and asset resources to act. This rapid pace will continue for the foreseeable future, as each time a new virus-related restriction announcement is made by the government, people will likely react with more panic buying.
- Adapt to changing delivery times. As essential retail services adapt, operating hours are continuously changing, and supply chain operators need to work to these unpredictable hours. There should be continual cooperation with local councils to allow for increased truck access, loading and unloading times. Extra drivers, as well as security personnel to oversee freight, could be necessary.
- Be careful to contract with certified and registered logistics operators. Many makeshift transport providers already advertise services to support the short-term surge in B2B and B2C fulfilment. Ensure that your freight is transported only by service providers with appropriate skills and certification, especially for food or hazardous goods or those requiring specialised handling.
Read Brendan Richards on the issues surrounding retail, here
The long-term focus
For sustainability beyond the crisis, supply chain operators should consider:
- Supply chain reshaping is vital and gives us an opportunity to learn from the recent challenges/choke points exposed by the Covid-19 pandemic.
- Build/redefine business continuity plans, especially where the supply chains failed during the pandemic to enable future supply chain protection and responsiveness.
- Think carefully about pricing. While demand for transport logistics is surging, providers will need to be mindful of short-term pricing changes that may impact customer trust and loyalty once the pace returns to normal.
- Prepare for longer-term shifts, for example consider micro supply chains. As the Covid-19 pandemic unfolds, consumer preferences and needs may shift quickly. Meanwhile, as different countries battle the pandemic, global supply chains will continue to be unreliable. This means organisations should start to consider the global-versus-local mix of their supply chains and look to diversify their access and risk. This could open fresh opportunities for local manufacturers and transport logistics operators to be key partners.
- Show leadership. While it is important to deal with the current issues, there is potential for transport logistics operators, manufacturers and retailers to collaborate and build industry-based solutions together. Can they do things smarter, more effectively and bring innovative technology into supply chain activities? If so, despite the crisis, they can build strong foundations for the future.
We see an opportunity to revitalise Australian manufacturing, spread risk and build resilience into domestic supply chains. A key lesson from the Covid-19 pandemic is the need to build in long-term solutions that help customers – and work collaboratively with all trading and logistics partners throughout the entire supply chain.
Brendan Richards is a partner and the national sector leader in transport and logistics at business services firm KPMG
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