How to mitigate these challenges across Planning and Manufacturing using smart interventions and Change Management
A recent survey conducted by EgonZehnder concluded that;
“Chief Supply Chain Officers are facing the most disruptive supply chain environment ever, requiring new leadership approaches to evolve a new way of operating”
The Office for Budget Responsibility (OBR) has warned of a possible 35% retraction in the UK economy, post Covid-19, with up to 2m jobs lost. According to IMF, the Dutch economy will shrink by 7.5%, while unemployment will almost double to 6.5% by the end of this year. This will likely be further compounded by the supply and demand shock in the short term, as consumers with low confidence in their own financial stability will be reluctant to part with their income, and suppliers, with their own financial challenges or personnel restrictions will only be slowly ramping up their supply chains.
A well rounded Supply Chain leader will know that they will have to make the typical hard interventions, associated with economic contraction: Planning effectively with sharp demand and supply fluctuations, increasing Productivity to cover shortfalls in the P&L and managing working capital effectively. However, the best Supply Chain leaders will also invest effort into the softer interventions.
A recent survey by BVC shows that we have just experienced a transformation in just 6 weeks, that would have normally occurred over 5-7 years! As a leader, it is critical to understand the impact this may have on the well-being and the performance of employees. In the era prior to Covid-19, employees experienced a sense of connection and involvement and a strong emphasis on performance.
For the period after Covid-19, employees desire a company culture with a drive to build resilience, to find new approaches and ways of working, to use technology to connect and work flexibly and to continue to engage and work together. Therefore, when Supply chains restart there is likely to be unusual and unexpected demand and supply behaviours, as well as new expectations around culture and working practices.
Planning and Scheduling
The Supply Chain movement, places “lack of insight into customer demand (60%)” as second on its list of risks, however you will still need to plan… so how:
If you can’t beat variance by forecasting it then your system will have to be capable of dealing with it in real time – you will be likely to experience longer or uncertain lead times for your own raw material supplies, and you will have to mitigate this, If your systems are connected and your operating rules are defined, this becomes a lot more straightforward.
In the longer term a move away from traditional, one dimensional (future demand expectation) demand models could be replaced with real time predictive models (historical data + future demand + meta-data), however digital transformation would be required to build the data and analytics ecosystem for this to work effectively.
More information about Data Driven Leadership
Labour Productivity and Service
With uncertainty in demand identified in the previous section, there will also likely be uncertainty within your own labour availability, as people unexpectedly take leave to battle an illness, care for family or self-isolate. How to deal with this additional uncertainty is down to the strength of your Operating System – the system by which you layout your plan and measure deviation from it.
As delivery lead times will likely be under pressure due to the uncertainty of the front end of your process, the last thing you should be doing is taking your eye of the ball at the back end. Companies that ride this out will be those that offered the very best service in uncertain times, research conducted by The Supply Chain movement, into current Supply Chain bottlenecks places “outbound shipments to customers (50%)” as third on its list.
Stability in Service Delivery performance is only achieved by stability in the front end of your process.
According to the Supply Chain study, 62% of supply chain leaders revealed they lack adequate resources to meet the ‘future challenges’ that have now become a reality. From building cultures that embrace change and ambiguity to creating an environment that allows Senior Supply Chain leaders to work cross-functionally with other business, the future of the supply chain has never been more important.
In our view, successfully enacting change means that leaders should address every factor which contributes to the overall business performance. Paying as much attention to steering behavioural change as getting to grips with “hard” change: such as processes, organisation and the implementation of new technology. All of this needs to be done while ensuring a smooth alignment between all relevant elements.
More information about: Change Management
You are likely facing several leadership challenges, but we would wager that if you are a Supply Chain leader then all the above are on your list. As you enter a challenging and critical juncture, take solace that Forrester highlight “Insight-driven businesses are growing at an average of 30% yoy” and are “on track to earn $1.8tn by 2021” so if you are data focussed, insight driven and have the balance of hard and soft interventions, then opportunities do exist.
Sam Clarke is Senior Business Process Excellence Consultant at R&G Global Consultants.
Sonja Wekema is Head of People & Culture at R&G Global Consultants and Managing Partner of The Other Perspective.