COVID-19 has disrupted many supply chains: demand has evaporated due to market lockdowns, production might have stopped due to supply lockdowns and inventories are rising unavoidably. The sudden demand and supply shocks will lead to large deviations in inventory levels. High inventory levels in the upcoming periods will be followed by periods in which inventories deplete when markets open up again, and even many stockouts will occur if supply chains are not well prepared for recovery. Supply chains with long lead times and/or that lack end-to-end visibility find themselves in the “danger zone”, and companies upstream in the supply chain will be impacted most due to the bullwhip effect.
How to navigate your recovery?
As markets are opening up again, it is now time to choose and implement your recovery strategy. Underlying questions that arise include: when will recovery start? How large is the initial demand leap and over which period of time is it spread out? What will be the ‘new normal’? How will the lockdown be ‘unlocked’? Can we expect a second or even more lockdowns in the future? For companies which experience the opposite effects of COVID-19: how to bring production rates back to the ‘new normal’? A lot of questions, with very little answers, doesn’t mean it is impossible to prepare for recovery.
Admittedly, every supply chain and company experiences a different challenge and requests for a tailored approach. Yet, we believe the following three ingredients are key for a successful recovery:
- Create end-to-end supply chain visibility, in order to determine (rough) estimates of the demand and supply recovery parameters.
- Apply scenario planning techniques: using rough estimates, what-if simulations help you gain insight in and explore what variables dominate future stock developments across the supply chain. The insights also create focus on what variables deserve additional forecasting attention.
3. Team up with your supply chain partners! Align your recovery plans with your supply chain partners (or even better: create them together) to ensure its feasibility.
Supply chain recovery: the bumpy roads ahead of us
The challenge many supply chains face reminds me of the song by City to City: the road ahead for your supply chain is bumpy, with miles of the unknown ahead of you. Nothing is sure along the way, not even tomorrow. Supply chain scenario planning can help you navigate out of the lockdowns, not only to select the initial route but also to change it along the way. We have demonstrated our scenario planning approach for a concrete example during a live webinar on May 13th. Our presentation can be found here.
Our experts look forward to support you along this challenge, so please reach out to us and join forces. For the rest: take life the way it comes, take life the way it is. But above all, take care of yourself and your families!