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Gone are the days of overly lean supply chains

One thing that we’ve learned from Covid-19 is that we don’t know what the future holds. Supply chains across Australia are having to play it day-to-day according to unpredictable consumer behaviours that are threatening to unhinge operations.

The lockdowns have led to buying frenzies that have seen our relative consumption of household products double the actual population in Australia.

During the first lockdown, toilet paper was aggressively flying off the shelves and now under the second lockdown in Melbourne, masks and mask-making materials are the ultimate commodity.

Contrary to public sentiment, Simon Rowe, Supply Chain Transformation and Operations Leader ANZ at Kimberly Clark, the manufacturer of Kleenex, plainly states, “we were never going to actually run out of toilet paper”.

However, the ability of supply chains to keep up with such rapid and unplanned demand was under immense pressure, with consumers expectations only growing as demand mounted each day.

Although Covid-19 has put enormous pressure on supply chains, the future of supply chains is not about fortifying your operations to cope with a once-in-100-year crisis.

Covid-19 levels are not the new norm, but it will forever change the risk profile of supply chains and radically change supply chains from being focused on lean operations to flexible operations.

While supply chains will focus on getting items to consumers in the short to medium-term, in the future it will be about creating a malleable supply chain.

Building in agility for short to medium-term supply chain management

Panic buying and peaks and troughs across categories will continue as we undergo the long and fluctuating recovery from Covid-19. In the short to medium-term, supply chains will need to focus on adapting their operations and building in agility to fulfil orders.

During the toilet paper panic buying frenzy, Kimberly Clark were forced to pivot their operations and quickly adapt as they turned 12 months’ worth of inventory in one month.

Rowe says, “We had recently undertaken a network transformation in our supply chain, which enabled us to become much smarter in the flow of our inventory. We scaled up our manufacturing outbound transport volumes, simplified our range, implemented a direct to retail store distribution capability and a direct to customer capability from our remote regional manufacturing location.”

This ability for businesses to be agile and create these options in their operations will be vital as supply chains live out COVID-19.

Flexibility the way forward

As the future becomes more unknown, scenario modelling will become vitally important in creating flexible and scalable supply chain solutions to cater for various scenarios will be the way forward.

During the modelling stage, organisations will need to pressure test the risk element of their supply chain, offset this with commercial gains and build a tailored supply chain solution that balances cost efficiency and flexibility.

Organisations will begin looking at redesigning their network to allow for flexibility, by alternating the way orders are fulfilled to line up with changing consumer behaviours, including the increased adoption of e-commerce. This may be a trade-off between a fully fixed automated solution to a combination of fixed and mobile automation but also may involve staged implementation as the future becomes more known to balance risk accordingly

As part of a detailed review of the supply chain network and distribution centre design, organisations will then assess a fit for purpose solution looking at options of high and low risk versus financial benefits. For organisations where there is more volatility in their inventory and risk involved, this may lead them away from full automation, whereas in the past this may have been driven purely by financial metrics. More organisations may look at adopting mobile automation, which is flexible and scalable, in the sense that you add more or less robots according to how your business is performing.

In conclusion, consumer behaviours, which is being impacted by Covid-19, are having a profound impact on supply chains. For now, as supply chains grapple with unpredictable consumer behaviour they need to build agility in their operations to respond quickly. As we head to an unknown future, gone are the days of overly lean supply chains, replaced by a new era of flexible supply chain operations.

Marcus Carmont, executive director of TM Insight.

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