Covid-19: The Lessons for S&OP
5 Ways to Achieve Supply Chain Resilience
React, Recover, Realign
5 Ways to Achieve Supply Chain Resilience
React, Recover, Realign
As Covid-19 and lockdowns swept the globe, unprecedented demand disruption followed, and businesses needed to react. Long laid and intricate demand and supply plans were torn up, tossed aside and needed to be reformulated within hours. With little time to run full S&OP cycles, many C-level executives were left re-planning their businesses in Excel despite multi-million-dollar investments in planning systems.
Then, almost as soon as we were through the initial reaction, the challenges of the recovery phase were quickly upon us as it emerged that different cities, states and countries were reopening at different speeds and even prioritizing different sectors. How this would translate into demand was almost impossible to predict, so we find ourselves in need of constant “sensing” of external data at a granular level, such as mobility trends, consumer confidence and even the financial health of our customers and suppliers to help us plan.
At an unknown time, we will enter a final realignment phase as we return to normal. Just as we were forced to abandon historic data on the way into the crisis, we will have to realign history on the way out. However, as the dust settles, the biggest challenge for planning leaders may well be the looming executive post-mortems into why our S&OP processes were not better able to respond.
One thing that’s certain amongst the current melee of uncertainty, is that companies will take a stark look at how S&OP met the challenges of the Covid-19 shock. To use a highly simplified analogy, when cities in the world are forced to shut down with a mere dusting of snow, other cities such as New York or Chicago are able to effortlessly blast aside mountains of it. This is an indication of snowfall resilience and so post-Covid, we can expect to see a refocus on supply chain resilience.
Supply chain resilience comes in the form of network resilience and also S&OP (or process) resilience. Because S&OP is the organization’s brain, it needs to be ready to lead the response in any crisis. Since the dawn of globalization, supply chains have become increasingly susceptible to shocks; as their global reach increases, events anywhere in the world can impact on seemingly local supply chains.
It is snowing more often and we are certainly receiving more than a dusting.
So, in the post-mortem, we must ask not just whether S&OP is fit for purpose but also whether the definition of fit for purpose has just shifted. The “steady state” systems of yesteryear are simply not cutting the mustard. The good news is that the ROI for upgrading S&OP is very compelling. The capabilities required to respond to shocks are the same capabilities that allow speedy and effective planning for the challenges we face on a daily basis (promotions, price changes or capacity changes to name a few). So, by upgrading S&OP, we are not just buying disruption insurance, but we are also making the daily ‘planning brain’ of our business more effective. We need only look to companies like Amazon and Apple to witness the competitive advantage that can be gained from network agility and planning resilience. While their supply networks were disrupted due to the sheer scale of Covid-19, they fared extremely well compared to peers and remain global leaders on a day to day basis.
There are five key capabilities that will enhance day to day planning while also making us shock resilient. The importance of these capabilities is often underestimated when designing S&OP for the “steady state” but their critical importance in helping us to react to shocks is almost always discounted due to the perceived infrequency of ever-increasingly frequent shocks.
Global networks need to be more agile and resilient in the face of more frequent storms. As planning is the backbone of any response, S&OP also needs to be more resilient and agile. This requires augmenting current capabilities.
But it might not just be the day to day and the next storm that we need to prepare for. There are likely to be structural supply chain shifts post-Covid. We will potentially see network de-risking with trends towards near-shoring and multi-sourcing in the quest for resilience. And there are likely to be many aftershocks including geo-political tensions and supplier bankruptcies.
So, we need to invest in planning capabilities to be more efficient day to day, to be ready for the next storm, and also to be able to plan for likely supply disruptions, structural shifts and geo-political tensions.