Reimagining the supply chain

Person: Rajesh Kumar, Head of Supply Chain of a multinational consumer electronics firm having products in personal care, medical devices and imaging. Rajesh is pacing nervously in his bedroom, which has been his office space for the last 50 plus days in the COVID related lockdown in India. New guidelines for ‘Lockdown 4’ are expected at any time.

Rajesh had to do the business impact assessment of these guidelines. He looked at his To-Do list:

Movement of containers stuck at JNPT
Material safety on trucks stranded on the highway
Supply to the plants of PCBs manufactured by a start up in Chennai
Payment to the transporters
Alternate arrangement if there is a shortage of labour and drivers due to migration

He was feeling overwhelmed as he did not have answers to many questions. He had never faced a situation like this in his 25 years of career. As he was thinking, his mind flashed some of the awards he had received:

Lowest cost of manufacturing in Asia Pacific
Lowest inventory among all the plants for medical devices
Best cost reduction idea: sourcing from China

He was reflecting whether the awards he received were for the short-term benefit or they were sustainable. COVID crisis has questioned all known norms. He remembered the points he had made at the Round Table on SCM earlier in the year. “The role of the supply chain is equally critical in all the end markets. However, the shape, size, length, complexity differs. For end markets like vegetables, it is the shortest – producing and consuming locations are quite close. Whereas in products like electronics and automobiles it could span a few continents. The material would move for a few weeks between the origin and destination.” He had to present a point of view on the supply chain in the post COVID era. His thoughts were still muddled. The critical question was – what will be the interim impact and what could be permanent changes?

Slowly, his thoughts started to crystallise as he kept focusing on first principles.

Demand will be uncertain as consumers would first assess the personal financial impact of COVID before committing to any purchase
Further penetration of Ecommerce as consumers have got used to it for many more categories in lockdown
The universal principle of Total Cost of Ownership and not only focusing on the purchase price or logistics cost

He zeroed on the following changes in the supply chain:

Responsive supply chain as against just efficient – make to demand and not on forecast. This would mean a need for flexibility in resources including manpower
The trade-off between RISK and COST. As a strategy, companies would have the following sourcing guidelines
At least 2 sources of supply for all components
At least one local/indigenous source
Shared resources – warehouses, trucks, manpower. It has already started in some parts; it will get accelerated as companies focus on flexibility and costs at the same time. This will give rise to more multiuser facilities, part-load shipments etc.
More digital supply chain. Paper will be substituted with apps and scans. Even B2B customers would expect visibility like B2C e-commerce
He thought about the migrant issue. Man, vs machine trade off. But he concluded that migrants would come back within a few months and India will continue to have more labour-intensive work. He fleetingly thought about 3D printing. Then he concluded that it is certainly a possibility, but it will take some more time to mature and replace the current manufacturing processes. He concluded that irrespective of the likely changes, the supply chain would continue to be at the forefront of business strategy. “Supply chain professionals are not just ‘behind the scene’ players. Everyone knows about the 4Ps of marketing – product, price, promotion and place. COVID has proved again that the important P is the place for the brick and mortar economy. Goods must be available for the consumer at the point of consumption. “He was reminded of Robert Barrow, US Marine Corps General, who summed it up nicely “Amateurs talk about strategy and tactics. Professionals talk about logistics and sustainability in warfare”.