Supply chain leaders discuss keeping up with demand in disrupted times
Supply chain leaders discuss how demand has shifted drastically all whilst trying to operate on entirely new playing field in 2020
Ask a supply chain professional where they would expect to be a little over the half-way mark of 2020 and there would have been the usual gripes around hiring, visibility, costs and an expectation of steadily growing e-commerce and returns volumes.
When you put in resiliency plans, typically it's [down to] a day, to a week, maybe two weeks. Who's expected four to five months? None of us
It would probably be safe to say that few would have predicted that they would need to be handling e-commerce volumes typically seen on Black Monday or seasonal peaks each day, every day for weeks on end throughout Q2.
On top of that, no-one would have foreseen that stores would be shuttered month-after-month and that they would suddenly need to shunt supply chains.
“When you put in resiliency plans, typically it's [down to] a day, to a week, maybe two weeks. Who's expected four to five months? None of us, and so it's a different game,” says Jeff Davidson, a Senior Operations Executive for Microsoft’s Global Devices Operations and Supply Chain.
We’re in the peak from hell right now
Even more stressfully for those professionals, this is going on against a backdrop of major disruption across supply chains.
“We’re in the peak from hell right now,” said Brian Bourke, SEKO Logistics’ Chief Growth Officer, who took part in a Reuters Events: Supply Chain roundtable, which gathered supply chain leaders for an open exchange of ideas.
“We didn't see any clients just kind of maintain their levels of volume at all,” expanded Bourke, instead seeing fluctuations across their client base. “Disruption has been kind of the name of the game.”
We were seeing peak volumes for about four weeks at a time
The COVID-related disruption is rippling out, pushing upstream into supply chains and then into customer demand.
“We were seeing peak volumes for about four weeks at a time,” says Rose Smith, Head of Supply Chain Development for LEGO®, which were comparable to holiday buying seasons.
This, combined with the pandemic shining a spotlight on their supply chain structure, led Smith to reappraise the robustness of their supply chain, both in terms of production and distribution.
Mark McLaughlin, Carrier Manager of the White Company, also evaluated their systems, with an aim to make their workforce less vulnerable: “We set up processes as soon as we saw got wind of this pandemic, and splitting shifts and gaps between shifts, keeping the same people always” on the same teams and under the same managers to reduce the risk of infection, while maintaining volumes.”
Domestic manufacturers … will have a much higher cost; I've seen most prices being triple to quadruple the price of what we see with our overseas manufacturers on average, but the lead times are a lot shorter
A further element is diversifying “The risk in a model from having a single stock holding, to two, to multiple plus cross-border delivery,” says Davidson and to move towards diversified carriers, so there are back-up options.
Vitaliy Solovyev, Senior Supply Chain Director of Paris Baguette, agreed and noted they have “Started looking for redundancy in the supply chain by looking for a domestic manufacturer.”
Although the downside is “domestic manufacturers … will have a much higher cost; I've seen most prices being triple to quadruple the price of what we see with our overseas manufacturers on average, but the lead times are a lot shorter. [However], the lead time will go from three months to about four weeks sometimes and you can ask them to process a stopgap … to mitigate those risks with overseas manufacturers.”
We're seeing projects [being] started and rolled out in real time
These procedures need to be complemented by a more agile approach, both in terms of the immediate solutions required to survive and thrive in the current situation, and permanently going forward.
“We're seeing projects [being] started and rolled out in real time,” said Bourke. “There's really no time to wait anymore, because forecasts don't mean anything. You need to be as nimble and flexible and agile is possible today, or even yesterday. That's one of the big themes that we're seeing.”
“We're all first responders initially in supply chain…. It's sort of how do we become just in time overnight?” says Davidson. It’s gone from “processes that may have been weekly or monthly type cadences, [and then] suddenly, it's daily and hourly.”
Both Bourke and Davidson note that part of this is “bypassing DCs” (Distribution Centres), and instead moving towards direct-to-consumer operations, which cuts down on handling and also the risks of fulfilment centres closing.
Instead of three fulfilment centres, we have hundreds now, because we turned all our stores into shipping centres
For Sean Wanigaserkara, Global Supply Chain Manager at Levis, it was a case of introducing nimbleness and direct-to-consumer operations by reappraising what they already had in place.
“We have three huge fulfilment centres in Ohio, Mississippi, and Las Vegas. What happened with COVID was everything shut down,” but they still needed to try to meet short shipping timeframes. “So, what we also did was, as our stores closed down, instead of three fulfilment centres, we have hundreds now, because we turned all our stores into shipping centres. We are shipping to customer from the store.
“So, what we need to understand is when we are offering things on the website, and then people put in the address, then we give them that shipping information, [we figure out] if they're eligible for same-day delivery based on where they are, what the closest store is, and then the product that's in the store. This is all coming from machine learning software,” which is doing the heavy lifting equivalent of hundreds or even thousands of human hands. “Machine learning software will do it in real time,” noted Wanigaserkara.
Davidson noted a similar approach that has turned small gains into a useful return. While they don’t “Have the store footprint for ship-from-store” everywhere, what they “can do is use machine learning to identify the highest running, most predictable SKUs and set up micro-fulfilment sites close to major metropolitan areas. We don't have to do it a tremendous scale, but wherever we can make a difference just to squeeze out, you know, a fraction of a day or something is kind of the goal.”
The clear lessons of this crisis are to take a resourceful approach, think about how supply chains are being stretched and squeezed and how you can leverage existing resources not only to cope but to make supply chains more resilient in the future.