How COVID-19 is Transforming the Future of Supply Chain Planning
In these uncertain times, supply chain planning experts are having to completely overhaul their enterprise resource planning strategies to remain adaptable in the long term. And while historical data is helping them locate actionable solutions, balancing supply and demand has become infinitely more difficult. When the COVID-19 outbreak started making headlines in early January, few companies were prepared for the supply chain disruptions that would follow. From raw material shortages to transportation delays, industrial manufacturers have had to grapple with a host of planning and scheduling conflicts that threaten the stability of their operations.
Supply chain planning has always been a top concern for manufacturing firms, but the current business climate has only accelerated the need for real-time data and accurate forecasting tools. As noted by a recent article from Business Insider, calls for social distancing and self-isolation have created a high demand for certain products and all but eliminated it for others. Additionally, since many manufacturing firms rely on labor-intensive processes that require employees to work in close proximity to one another, these infection mitigation trends have only increased the frequency and scale of production delays. While many business leaders are optimistic about an eventual return to normalcy, there’s a good chance supply chain management will be equally challenging in a post-COVID world.
The digitization of supply chain management
Effective supply chain planning requires end-to-end visibility over key business applications, workflows and enterprise data from the moment raw materials are procured to the delivery of finished products to end consumers. By its very nature, supply chain planning is a forward-looking process that seeks to manage existing and emergent risks, forecast future demand and optimize decision-making at the executive level. More recently, supply chain management technologies have revolutionized how manufacturers collect, store and utilize business data. According to Gartner, some of the key capabilities of supply chain planning tools include:
- Sales and operations planning
- Event planning and project management
- Demand planning
- Inventory management
- Strategic network design
- Distribution requirements planning
- Supply chain optimization
Of course, all supply chain planning processes rely on accurate information and streamlined data-sharing networks to develop actionable solutions on the fly. Manufacturers must ensure their forecast numbers are updated and accessible to relevant stakeholders, including those in sales, operations, marketing and the C-suite itself. The same is true for inventory management, as balancing supply and demand in an unstable business climate requires both historical data and forward-looking insights.
Reassessing supply chain planning processes
Modern supply chain management incorporates a wide range of concepts and practices focused on maximizing performance, reducing costs and optimizing production scheduling. Since new planning strategies are constantly being developed, manufacturers must stay on the bleeding edge to ensure they’re adaptable in the face of global supply chain disruptions, such as COVID-19. According to the Association for Supply Chain Management, there are seven core principles of supply chain planning that every business should leverage:
- Data management: To remain flexible, manufacturers must establish a “systematic” process for managing critical business data. This includes tracking raw material costs, customer orders, production resources, supplier activity and more. Without an integrated ERP solution, manufacturers may struggle to aggregate large amounts of data from different sources, which in turn could limit their ability to forecast future supply and demand.
- Tactical planning resources: Once effective data-sharing systems are in place, manufacturers are better able to synchronize their planning activities across disparate business units. In times of crisis, however, these communication channels can quickly break down without a clear risk mitigation strategy. By coordinating execution planning processes using supply chain management software, manufacturers can simultaneously look for short-term solutions to supplier disruptions while maintaining long-term profitability.
- Collaborative processes: Effective supply chain planning requires input from various internal stakeholders, third-party suppliers and B2B customers. This is particularly crucial when normal sourcing channels are disrupted or previous forecast models are proven to be inaccurate. Manufacturing firms that are able to promote collaboration between different groups (with different business goals) can better adapt to changes in their supplier networks and shifting customer expectations.
- Data-driven forecasting: Balancing supply and demand has become an artform in the interconnected business world, as global supply chains add significant complexity to even the most mundane planning processes. By using a data-oriented approach to production forecasting, manufacturers can better account for modeling errors, cumulative bias and year-end volume variations.
- Focusing on point-of-sale data: Instead of prioritizing sales orders and “sell in” data, manufacturers should focus on “sell-through” metrics to get a more holistic picture of their planning and scheduling performance. This can not only help supply chain professionals efficiently manage inventories, it can also help them identify event-based fluctuations in supply and demand, leading to more agile decision-making.
- Lifecycle management: To bridge the gap between product development, production and point-of-sale returns, manufacturing firms must implement an end-to-end management strategy that evaluates the entire lifestyle of their goods. Doing so can help business leaders identify gaps in their production planning, set clear delivery expectations and pivot to new management processes in times of crisis.
- Continuous improvement: As the COVID-19 pandemic has demonstrated, no supply chain is completely insulated from major disruptions. To remain competitive, manufacturers should continuously look for areas of improvement and develop new ways to make their supply chain planning more responsive. One method is to incorporate consumer and user behavior into the decision-making process, as this can help produce more accurate forecasts and inventory management frameworks.
There’s no telling when global supply chains will return to some level of normalcy, but it’s clear that this moment in history marks a turning point for the manufacturing industry. Rather than pushing against the rising tide, supply chain professionals should use this opportunity to create more resilient production processes and diversify their supplier networks.
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