In these unprecedented times organizations have to deal with an extremely high degree of uncertainty on both demand as well as supply side.
Demand variability is at its peak because the consumer priorities have shifted and they are more focused on procuring the essentials. They are also open to switching brands. Additionally, there is a limited retail and distribution window available due to lock down restrictions. Demand Planning has become extremely complex as there is no relevant history due to changed buying behaviour.
On the other hand supply variability is also at its peak. There is limited production capacity available either because the factories are shut or are operating at a limited capacity due to labour and social distancing constraints. Apart from this, suppliers are also facing a similar challenge and some of the key ingredients are not available. Lockdowns are also leading to delays in dispatches as vehicles have to find new and longer routes through green zones. Apart from this factories are also losing capacity due to longer repair cycles, shortage of key utilities and consumables.
Organizations which can make the most out of these times will emerge as eventual winners and rest will struggle and may even perish. One critical aspect in this extremely constrained environment will be to get the Supply Chain planning right in order deal with the above uncertainties. A two pronged strategy will be important to weather this storm – (a) Maximize Postponement to deal with Demand Variability; and (b) Optimize the product mix to make the most out of available supplies.
The best way to deal with extreme demand variability is to delay or postpone to the maximum extent possible but not one step further. Delay till you are reasonably sure but not so much that you lose the customer. Remember, holding on to the loyal customers and acquiring new customers is still the key. Different organizations will have to identify the right postponement strategy depending upon the buying lot (or MOQ) of the customers, lead-time of shipment, lead-time of production and sourcing, warehousing capacities etc.
Organizations will have to maximize from the given resources (through optimized supply planning) and will need to decouple as much as possible from upstream uncertainties.
While these are difficult times it is not all over for the organizations which can demonstrate resilience. The ones which can make right products available to the customers will gain at the cost of competition. Fickle minded customers will make a switch and this is the right time to grab new customers. It is important to plan right in order to stay ahead of the curve and gain in terms of market share so that you emerge much larger after the COVID dust settles.