THOUGHTS

An Action Plan for Preparing Logistics and Supply Chain Recovery from the Coronavirus Impact

Mar 23, 2020

The coronavirus outbreak is a deep humanitarian crisis that is posing unprecedented challenges for business leaders and the economy as a whole. This article is intended to provide key insights to logistics and supply chain leaders grappling with responding to the existing crisis while ensuring employee safety, operational viability, and reviving their business from a historic supply-chain shock. A deep analysis of the ongoing situation by our industry experts suggests that several businesses can mobilize and set up rapid crisis management mechanisms to ensure business continuity. However, the typical focus of most of these efforts has been understood to be for the short term. Logistics and supply chain leaders must also plan for the medium and long term in order to build resilience for the future.

Logistics and supply chain COVID-19 impact

Evaluate existing inventory at hand

At this stage, businesses must begin by estimating how much inventory is available in their value chain. This facilitates capacity planning for the long run and also acts as a bridge to keep production running. Specific categories that must be considered include stock of finished goods in the warehouse, spare parts inventory, inventory-in-transit, and blocked inventory that may be held for sales, QC, and testing.

Create logistics and supply chain transparency

Begin by determining components that are critical for operations. Also, have a clear idea of the components that are sourced from high-risk areas and lack ready substitutes. Supply chain risks related to these commodities can then be analyzed to assess the risk of interruption from suppliers of tier-two and onward.   Manufacturing companies must engage with their key suppliers across tiers in an effort to form an agreement to monitor lead times and inventory levels and establish an effective recovery plan.

Estimate realistic end-consumer demands

A crisis such as the existing COVID-19 may cause an exponential increase or decrease in end-customer demand, making it increasingly difficult to gauge the fluctuations in demand harder.   Evaluating the underlying uncertainties in forecasts during short-term and medium-term demand planning is essential.  Additionally, direct-to-consumer communication channels, market insights, and internal and external can prove to be invaluable sources of information in assessing the current state of demand among the customers’ customers. To prepare better for supply chain and logistics challenges related to the demand, manufacturers can consider integrating market intelligence into product-specific demand forecasting models, use advanced statistical forecasting tools to generate a realistic forecast for base demand, dynamic forecast monitoring to react quickly to inaccuracies.

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