In these unprecedented times posed by COVID-19, it’s more important than ever to reduce your costs and optimize your supply chain in order to weather this unpredictable storm.
The way the world does business is currently in the midst of an enormous shift as companies large and small try to figure out how to cut costs and adopt a “new normal.”
Rest assured, we are here to guide you, not just through the pandemic as it continues to take hold of the economy, but see you through safely to the other side post-pandemic.
Companies are most concerned with Coronavirus’s effect on supply chains and damage to business partners. As COVID-19 continues to impact supply chains, there are a few major priority areas in which retail supply chains are starting to take action to mitigate the risks.
The supply chain industry currently faces many challenges, including shifting customer demand, restrictions, and potential material shortages, with the outbreak forcing many to adapt their supply chains quickly, says Supply Chain Digital. These include:
The first step is to create the alignment of a supply chain with your business strategy. Now, let’s take a look at each segment above and explore which actions to take.
Actions to Take
Retailers are working closely with companies across their supplier bases because the massive demand for essential non-discretionary goods has sparked network-wide shortages. This kind of communication is a top priority for businesses in the food, drug, and mass (FDM) categories, whereby the goal is to secure a fast, reliable supply.
- Redirect resources
- Simplify your SKU profiles to cut variety yet boost quantities
- Ease payment terms
- Widen delivery-appointment windows
- Relax on time and in full (OTIF) requirements
Retailers are recalibrating their product orders to meet customer demand, and as such, they will need to switch things up across purchasing, planning, and inventory management.
- Relocate inventory already owned to save money
- Revise purchasing plans, placing priority on high-demand items
- Direct inventories towards active sales locations
- Bypass inventory replenishment and allocation algorithms
- Reassign merchandising operations staff as well as in-store marketing budgets to increase operational flexibility for essential products
This segment is where demand for non-discretionary and discretionary goods will overlap in a big way.
- Reassign employees to boost capacity
- Cross-train store and back-office personnel
- Temporarily move office operations into distribution centers
- Stagger shifts to ensure worker health and safety, increase retention and cut down on turnover
- Cease operations between shifts to deep clean of distribution centers
- Conduct regular health screenings
Remaining flexible with logistics is critical.
- Bypass distribution centers and instead ship goods directly to stores
- Supplement non-discretionary transportation capacity with under-used discretionary goods fleets
Due to stay-at-home orders, companies are seeing a large increase in online shopping and local deliveries in regards to non-discretionary goods.
- Widen delivery windows from same-day delivery to three-day delivery to allow retailers time to determine scheduling and routing of deliveries
- Convert select outlets to “dark stores” to compensate for in-store traffic decline
- Hire full-service shoppers
- Temporarily shift in-store employees to delivery jobs
- Limit purchases of high-demand products
- Reserve certain periods of the day for high-risk shoppers, such as the elderly, and reserve extra time to deep clean stores
- Shorten opening hours
The pandemic has accelerated the pace of innovation and structural change, with two major priorities that have to take center stage and ensure sustainable growth: cost reduction and supply chain optimization.
Leading companies are starting to reconfigure their supply chains for the future by focusing primarily on aligning supply chain objectives with business strategy. Supply chain managers must further focus on improving efficiency, reducing supply risk, and enhancing customer satisfaction. To that end, companies must realize they will have to make certain tradeoffs. Some compromises might include but are not limited to, reviewing your medium- to long-term business strategies and determining the factors that sharpen competitive edges, such as supply security, speed to market, pricing and innovation. Setting strategic priorities doesn’t happen overnight. Need help with supply chain consulting? We are here.
Contact Incito Consulting Group
Let Incito help you through these confusing times with consultations on cost reduction and supply chain optimization strategies. Incito is an award-winning lean transformation consultancy dedicated to changing the way the world does business. Please contact us at 866-697-LEAN or send us a message online.
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