Supply Chains have been massively disrupted in the current environment and organizations are struggling to run factories in full swing. Factories are either entirely shut or are operating with very limited capacity. In the current situation companies will have to carefully plan to limit the damage and survive through these tough times. Following factors will be key to beating this downturn:
Since the capacities available are limited due to lock downs and social distancing constraints, making the most out of the asset hours available will be important. It will be critical to identify and prioritize those products which give maximum revenue per hour of Factory asset utilized. Products with low revenue per ton and / or the ones with low productivity will have to be dropped out of the bucket.
With limited production it will be important to convert what is produced into money. So the focus should be on products with high sale volume and low variability where the chances of erring on the forecast and hence idling inventory are minimum. In some cases, this objective might conflict with the one stated above. In such a situation one will have to go for products with lower risk (or variability) to ensure real revenue out of what is produced.
while the time is tough it also presents an opportunity to gain a share of business from the competition. The Consumer’s mind is fickle at the moment and s/he is more worried about procuring the essentials than being choosy about the brand. All that matters is the availability of the essentials on the shelf. This is an opportunity that organizations could look to seize - make the right products available and win fickle minded consumers particularly for the Brands which are critical to the company’s survival and growth.
As the lock downs ease or end organizations will have to plan the transition carefully. Critical aspects would be to get the Demand ramp up right. Getting the new demand right will be a challenge due to: (a) a lack of recent history; and (b) changed consumer behaviour post this disruptive period. Organizations will have to make reasonable estimates depending upon the businesses they are in to get the ballpark right. The other important aspect would be to plan the movement of the locked inventory across geographical borders at the earliest and make transportation arrangements accordingly.
Each business will have its own unique set of problems and will have to prioritize actions based on its own situation. There is no “on size fits all” solution but, in the absence of a concrete plan, the above may help in dealing with the current situation better.