Our response to the coronavirus outbreak that has drawn mixed reactions from various quarters, The speed and extent of the response has been varied from central government to provincial government. The COVID 19 outbreak has seriously imposed challenges on Supply Chain all Pakistani industries. Inland routes and transport have been troubled with the scheduling of deliveries. Imports of propriety and hi-tech items will not be conceivable in coming future with certainty. In response to demand volatility perishables food supply chain are immediately down rated their price strategy. China is the world’s second largest economy and, as the leading manufacturer, is critical to the supply chains of many companies. The strict quarantine measures that have been implemented there have led to economic disruption both country-wide and globally. Pakistan is importing material having worth of 3 Billion Dollars per annum from China.
As the COVID effects continues to spread, the impact on supply chains will become more intense and disruptive. Major industries including automotive, electronics, pharmaceuticals, medical equipment and supplies, consumer goods and more have been significantly affected. It is becoming difficult for exporters to meet contractual obligations; it may be wise to consider invoking new way of meeting the demand requirements or extend the delivery schedules.
Currently, manufacturers and retailers are struggling to meet a sudden jump in demand, pharma supply chain is under pressure. On the other hand, manufacturer is facing lock down situation and their transportation and distribution network are caged by government regulation, in order to confine spread of the disease. Trained skilled work force shortage and labor wages are emerging as new dilemma of the struggling industry.
How Pakistani companies should react
1. Be Agile
Instead of tactical planning for 3 months basis, companies should adopt agile techniques. They must consider “ spike of uncertainty” and “horizon of uncertainty”, supply chain planning needs to understand demand patterns and how they can satisfy this demand based on their production and warehouse capacity.
2. SKU Rationalization
Reducing liability is theme that should be perused, instead of value creation as is in the past. Inventory is the liability that should be right sized, the “SKU boom” is no more effective. Manageable SKUs that matching demand or customer preferences need to be produce only. Piling new inventory on old anticipation would be a big mistake in lieu of rapidly changing consumer requirements.
3. Local Sourcing
Panic buying – from China or Europe would not only create scheduling problem but also tend to create wrong commitment. During this crisis, companies need to produce more with reduced resources. Sourcing materials would not be the problem on the supply side for locally available materials. This will reduce production and warehousing cost and keep production alive.
4. S&OP the Focal Point
Winner will be anticipating ahead! Updated demand planning allows to produce only what is most in demand and profitable for the companies. This is made possible by optimizing the S&OP process with alignment production capacity. Operations also need to produce more efficiently and timely. Being able to react in an agile and efficient way is vital for coping with any crisis situations.
5. Closing the Gap – Omnichannel
Being closer to your customer is the gateway of making profit in difficult times. Distribution center traditionally ships orders in bulk to retailers or wholesalers, that should be reduced to week size or less. The push strategy with cost efficiency would create sell through situation and this inventory will stuck up in future in such volatile situation. Sending shipments to stores more frequently and in smaller lots to more precisely meet to demand rather than shipping big cases of products would be the strategy. The direct shipping with digital linkage would also be considered as potent sales channel.
6. Disruptions Planning
While planning supply chain, following disruptions must be considered before any tactical and operational decision making:
· Supplier Failure
· Labor Shortage
· Price Increase
· Consumer Buying Power
· Efficiency Syndrome
· Government Regulations
· Health issues
It will be no surprise that planned growth targets would not be achieved, however disruption sometimes creates new and more opportunities for development. To sustain the business on minimum would be the first target for every Pakistani Firm without downsizing the human resources.
As nations continue to close their borders and restrict internal travel, governmental regulations would createbig disruption for supply chains. It can be anticipated that all of these disruptions will impact next 12 months on Pakistan economy. However, brighter future is knocking on doors as our weather, geographical location and low-cost work force is bounty for investors and entrepreneurs.
Azhar Qadri
Supply Chain Expert | Operational Intelligence | Smart Manufacturing & Excellence | Supply Chain Optimization | Consultant and Trainer
MBA, BE, PE, CSSC, CPIA, CSCP CDDP, CSCM, CSCA
Trainer and Consultant - SMEDA
Executive Member - SCAP
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