In the face of the current pandemic, supply chains are experiencing increasing disruptions. The impact is twofold. First, organizations need to closely monitor both short- and long-term demand and inventory so they can accommodate production loss during factory closures and an extreme economic slowdown. Second, there’s a reality of inventory depletion as customers stock up. In addition, shipping and delivery are growing in popularity in areas where customers are advised to avoid any unnecessary trips outside their homes. Finding the right response to the pandemic for employees, customers, and the business is not easy, and many business continuity plans are being put to the test. Supply chain is no exception.

Steps for Managing A Supply Chain Crisis

The COVID-19 crisis has exposed vulnerabilities in many organizations, especially those that rely heavily on China or other international suppliers to fulfill needs for raw materials, or even finished product. Many companies are not fully aware of their supply chain relationships’ vulnerability to such a global shock.

The rapidly changing situation demands a creative and flexible response to supply chain crisis management.

Know Your Suppliers

The first step in your supply chain crisis management response is to review your entire list of suppliers, past and present, found in your ERP system. You may need to contact many suppliers, including those you haven’t dealt with in a long time, to find what you need to complete orders.

Consider the following as part of your supply chain crisis management:

  1. Connect with suppliers you haven’t purchased from in the last few years to make sure they are still in business. Review credit terms and shipping times as well as availability of materials you might need.
  2. Conduct quick inventory updates now, especially among items in great demand.
  3. Order frequently needed items. Although we normally caution against stockpiling inventory, now might be the time to bend that rule a bit, especially with components and materials sourced from overseas.
  4. Find alternative local, American, or North American suppliers with similar goods needed.

Run What-If Scenarios

Run outage scenarios and what-if scenarios now and review them with your team. Discuss approaches to each situation and how you might overcome the potential challenges posed by the what-if scenarios. For example:

  1. What if we cannot get supplies to complete an order? What then?
  2. What if our main supplier shuts down? What are the alternatives?
  3. What if 20, 30 or 50 percent of our staff calls in sick?
  4. What if we find we cannot complete orders due to a forced shutdown? How will we communicate with both our teams and our customers?
  5. What if we are forced to telecommute, which will negatively impact our factory staff?
  6. What if we cannot obtain packaging materials? What alternatives do we have locally?
  7. How will these alternatives affect price, delivery, or quality?

Brainstorm with your team for potential solutions to every aspect of supply chain disruption, including shipping, warehousing, and sales disruptions.

Plan for the Unplannable

Natural disasters such as hurricanes offer the best model of what to anticipate with the current COVID-19 outbreak. Like the viral outbreak, these unexpected natural disasters force businesses to cope with completely unexpected situations.

Many companies found after Hurricane Katrina that plastics and petroleum-based products were in short supply because the oil refineries along the coasts were closed and/or damaged. Alternatives had to be sourced, and quickly, to fill customer orders.

Keep in mind that we are facing a unique situation with COVID-19. We can compare it to regional disruptions from hurricanes or previous global flu epidemics, but each one posed unique challenges to manufacturers. The challenges your business will face today from this epidemic differ from any seen before, so expect the unexpected.

Accurate Information Is Vital

One important aspect of supply chain crisis management that cannot be understated is the importance of accurate communication. What information should you trust?

Go to respected sources. Many government agencies have specific coronavirus web pages to help you navigate these uncertain times. 

Communicate with Customers

Customers know there’s a crisis, but they may not understand why you can’t fill orders as quickly as before. Just as communication with your employees and suppliers is vital, so too is customer communication as part of supply chain crisis management.

Consider updating your website with a message or alert about possible delays, if necessary, and keep in close contact with customers about order status. Avoid making promises about delivery times. Instead, be cautious. It is better to under promise and over deliver than to disappoint customers.

Key Take-Aways for Supply Chain Crisis Management

Key points in supply chain crisis management include:

  • Knowing your suppliers and alternatives to current suppliers should disruptions occur
  • Having or updating contingency and emergency plans
  • Establishing crisis communication channels for employees, suppliers, and customers
  • Evaluating “what-if” scenarios and discussing alternatives before they become an emergency
  • Switching from overseas suppliers or sole-suppliers for materials to multiple suppliers to mitigate supply chain disruptions and the risk of complete shutdown due to dependency on a single source
  • Source locally, if possible, since foreign sources of materials may be the most impacted
  • Care for your people. Know your employees and ensure they have the resources they need to care for themselves and others in the emergency. Take a flexible approach to working arrangements, if possible, especially for office staff not required to work on premises.
  • Listen to state and local emergency officials regarding mandatory closures.
  • Gather information from accurate sources such as the CDC regarding symptoms, prevention, and other measures for dealing with COVID-19.

There’s hope on the horizon, but there’s still a long road back to “normal.” In early March, Chinese factories began to reopen and resume production, and eight provinces downgraded emergency levels, allowing more mobility for citizens and workers. While no crisis can be predicted, understanding your supply chain risks will give you more power to plan ahead while maintaining customer experience in the face of crisis.

Need help finding the right technology for your supply chain and business continuity planning? Talk to the experts at ASI now.