The value chain in times of pandemic: 3 crucial issues, their risks and mitigation strategies
Whether it be a volatile workforce, a sudden scarcity of raw materials, or interruptions to baseline logistics, the disruptions associated with Covid-19 on the management of the value chain are numerous.
Companies must re-evaluate the risk level of their value chain from an end-to-end perspective in order to deploy effective mitigation strategies adapted to the new reality of living within the present-day pandemic.
This blog will present three critical issues put forward by COVID that are linked to the value chain, as well as their appropriate mitigation strategies.
1. Mapping, transportation, and visibility of distant supply
With the COVID virus now present in over 200 countries, you need to monitor developments in the countries where your suppliers are located. While these providers may not be the most critical to your operations, the risk of disruption of their supply now depends on a multitude of factors, such as specific health measures applied by their country. Take the means to establish collaboration between all the strategic players in the chain, for each step of the process, attempt to harvest information on the operations of every actor involved, focusing on their production capacity, physical locations, and means of transportation and export. If a location is at a high risk for disruption, which could be the case if you have a high concentration of product flowing through, assess the possibility of alternative sources. If the local situation of a supplier begins to deteriorate, the risks of sanitary measures and restrictions to which they will be subjected will also increase. Consider a way to secure a higher quantity of materials that can be sheltered from disruption. Additionally, remember to move your orders outside of the supplier’s country as quickly as possible to avoid unpleasant surprises. The first wave of the pandemic generated a broad desire to reduce our dependency on a single territory. With the second wave, the challenge is to maintain this spirit of agility by having clear indicators established for each of the dependencies, ensuring appropriate contingency plans are in place.
In summary, to mitigate the risks related to mapping, transportation, and visibility of the supply chain:
Develop a collaborative strategy with your critical suppliers for monitoring operations and mitigating risks in the value chain. Take advantage of this collaboration to bring together all points of view and arrive at a mutually beneficial solution.
If you have multiple distinct sources of critical materials, make sure to secure sufficient capacity to withstand possible disturbances.
Develop indicators to monitor the geopolitical situations of the countries from which you obtain your supplies.
Using similar indicators, try to assess where the best place would be to secure a new supplier, and evaluate the possibilities of alternative sources in that region.
2. Critical materials and direct suppliers
We must not delude ourselves, after a pandemic induced wave of illness, there will be a decline in the level of service from some direct suppliers. As in the previous point, a good risk mitigation strategy will have to be implemented in collaboration with the suppliers. It is not enough to know who your strategic suppliers are, you must also understand the risks they face and evaluate their ability to deliver your orders based on those risks. To do this you should work with them to assess their ability to manage disruptions and the associated risks those disruptions could cause you. It is important to understand how a supplier plans on allocating their resources if they were to undergo further disruption because you are most likely not their only client. Focus on obtaining accurate and truthful information on their inventories, their production, and other factors that may impact your operations. Again, it may be wise to increase your inventory stockpile for all critical materials. In case of high-risk items, you must protect yourself, try to find materials or parts from another source that can be used as a substitute. Test these new goods on your production lines and give the necessary training to your employees. By doing this, if a strategic supplier has additional challenges in meeting their obligations, you will be able to ensure the continuity of your operations using substitutes. Additionally, if trouble were to continue with a particular provider, you will have already found another to support you. Combining this with your higher inventory stockpile, and you should have the necessary time to adequately reposition yourself.
Collaboration is key. Transparent communication and a global vision will be integral to successful navigation of future uncertainties. To mitigate the risk of disturbances related to your direct supply of critical materials one should:
Use a collaborative strategy with your suppliers to gain insights into what may be causing them disruptions and how your operations could be impacted.
With this information in hand, assess the possibilities of alternative sources or substitute materials.
Ensure to give the necessary training to your employees so that everyone involved in the contingency plan is ready if the need for it presents itself.
Increase the inventory stockpile of your critical materials to maintain your operations in the event of a disruption.
3. Workforce and local operations
If you feel that your supply is secure, you can focus on your local operations. Although you may have mitigated against the disturbances from your supply, we must not forget the internal risks of disruption. During a pandemic or any other period of uncertainty, labor will become more volatile, absenteeism will be higher (Employees’ contamination, closed schools, sick relatives, etc.), causing an increase in the complexity of planning and managing your operations. With this in mind, you need to guarantee a stable workforce for each of your critical company roles. This number of critical positions will depend on the risk assessment carried out with your suppliers. A training roadmap should be created to allow for more multidisciplinary employees, thereby allowing you to cover certain critical tasks while having additional flexibility in optimally allocating your resources in case of disruptions. The multidisciplinary nature of your team will help you maintain a longer and more flexible production schedule in the case of potential disruption. Taking this into account, in the case of a supply shortage of a critical material, you will be able to adjust the production schedule according to your inventories and maintain your operations and be ready to use substitute materials as needed.
To minimize any potential disruption to your operations, draw up contamination scenarios for each workstation and the possible consequences for the isolation perimeter and the affected people. If critical positions are commonly found in the isolation perimeter, try to review the workspaces with the aim of minimizing non-essential close contact and movement. Otherwise, consider the possibility of adding a physical barrier to minimize contact. Should an employee test positive for COVID you will be able to execute contact tracing to isolate, track, and disinfect, and thus keep your operations up and running while minimizing disruption and protecting your workforce from unnecessary exposure.
In summary, risk mitigation related to your workforce and your local operations will be assured through:
An assessment of the number of critical positions, their location and contamination risks linked to them, as well as the mitigative actions to be implemented. (Moving the workshop, physical barrier, etc.)
Continuous training of employees to make them multidisciplinary, thus ensuring agility in your workforce, allowing for more resilient business continuity.
Higher inventory stockpiles, and possibly inventories of substitute parts, depending on your risk assessment.
The complexity of supply chains will continue to increase, and as much as we want to think of them as being robust, it only takes an extremely unlikely scenario, such as a global pandemic, to cause a great deal of disruptions. Each supply chain brings it own realities and mitigation strategies that should be adapted and unique to them. However, it is only by becoming aware of these vulnerabilities that it is possible for the concerned organizations to plan for the worst and to move forward through these difficult times with confidence.
I hope you have enjoyed reading this blog, if you want to continue the discussion, do not hesitate in contacting us.