Supply Chain Resiliency and What We’ve Learned From COVID-19
While supply chains have always been a critical consideration for business continuity programs, because of the pandemic, you’ve likely experienced extra stress on your supply chain since March 2020.
Have you experienced more difficulty getting your key suppliers to meet baseline or spiked volumes?
Have you had issues staffing your distribution centers or fleet?
Have you been unable to achieve the “new normal” because work-from-home and social distancing doesn’t work for logistics teams?
In one recent study, just less than half, about 42% of respondents, said they will change their shipping and supply chain strategies because of experiences during the 2020 coronavirus pandemic.
These new conditions can cause significant impacts to your organization’s reputation and ultimately to your bottom line. Fortunately, because most organizations struggle with the same stresses right now, many business continuity practitioners and supply chain strategists are already tackling these problems.
Most of my client work since March 2020 focuses on supply chain resiliency and pandemic-related impacts. Some of these projects are part of larger implementations or ongoing program management, while others are supply chain-specific due to COVID-19 impacts.
Through these projects, our team of business continuity consultants are working with clients to tackle many of the questions above. Here’s a look at what we’ve learned—and accomplished—so far:
So what does the roadmap to better supply chain resiliency look like?
There are three key steps you can take to close gaps and increase your supply chain resiliency. These steps are partly strategic and partly tactical. The ultimate goal here is holistic improvement to recovery strategies, procedures, and communication.
Step 1: Analyze Likely Pain Points or Single Points of Failure
The first step is to set aside a specific time to analyze supply chain risks and to plan for the future. Where possible, try to integrate these meetings with a mid-event after-action review or with your regular business continuity meetings.
The specific audience for these risk reviews depends on the complexity of your organization and your supply chain.
For a relatively small organization or simple supply chain, you’ll likely only need one or two representatives present during a business continuity team meeting. For greater degrees of complexity (e.g. multiple distribution center types, international networks, complex technology, or a wide array of product) you may need a dedicated meeting with supply chain leadership
If possible, use previous business impact analysis (BIA) and risk assessment results as a starting point.
Look for any “red flags” in your data (e.g., known single points of failure, resources that have previously experienced downtime, or processes/resources that would cause major downstream impacts if disrupted) and then present them to leadership for acceptance or treatment. It’s similar to the way you may present an annual BIA summary, but more laser-focused on what’s happened since COVID began.
As with any risk review, analyze risks by considering four major resource dependencies: suppliers, personnel, technology, and facilities.
You should identify critical upstream dependencies and fourth-party suppliers. If all of your suppliers rely on the same group of suppliers, that second-level upstream dependency could have major implications for your supply chain, even if you don’t have specific issues with your direct suppliers.
Diversifying your supply chain is more critical in the days of COVID because there are now more risks to your single-source suppliers than before.
Also, look at supply chain staffing and facilities in greater detail since distribution center personnel or drivers can’t work remotely and quarantines bring mass absenteeism. During the pandemic, we’ve helped organizations source temporary staffing firms for lean workforces, created plans to quickly send personnel to alternate facilities, realigned material handling equipment (MHE) routes in facilities, and integrated more robust sanitation protocols and services into recovery plans.
Additionally, here are some questions (from our Mid-Action Review toolkit) that may help you self-evaluate your COVID-19 response:
Are there any “new” suppliers that were successful and you should continue to use them?
Do you need to adjust contracts with existing vendors based on pandemic impacts?
Are there any notifications to vendors/customers regarding resumption of service?
Are there any supply chain strategies that should be further developed (e.g., requiring vendors to have business continuity plans or identifying alternate suppliers)?
Step 2: Take Decisive Action
It’s important to stress here that you need to create specific tactical actions coming out of any review. It’s a great starting point if you recognize that you only have one supplier designated for a key product or that you only have a few alternate employees available at a site if you need to quarantine a shift for two weeks. But, recognition is only half of the battle.
If you have existing plans, (e.g. crisis management plans, business continuity plans, or site-based emergency response plans) you need to update them based on reviews.
For example, you may designate 15 employees at each distribution center who are willing to backfill other distribution centers, if those facilities have an outbreak. Document their contact information in your plans, and work with human resources and finance teams so you’re ready to cover their hotels, transportation, and meals at a moment’s notice.
If your current cleaning protocols are not robust enough for continued effects of COVID, identify and onboard a cleaning company as soon as possible.
If your facility forces too much proximity among workers, work with site managers to stagger shifts or to create new workflows to minimize employee contact. If you don’t have alternate personnel available, start contacting temping firms in case you need to onboard contractors.
For suppliers, you may need to identify and onboard alternate suppliers now. Document their contact information in your plans. If necessary, engage those alternates to draft tentative work agreements.
Other factors you should consider at this stage include:
Could all my suppliers be affected by one regional outbreak?
Do they all rely on the same transportation partners?
Do all my current suppliers rely on the same upstream supplier?
Wherever possible, use these considerations to select alternates.
You should also have robust facility considerations in plans, asking questions such as:
How much capacity does each distribution center have?
What are the storage utilization rates at each?
What are the minimum staffing numbers you could limp along with?
Can you store additional safety stock in case our suppliers are affected in the future?
All of these factors should be documented and analyzed:
Order additional stock where you can.
Create proactive “total loss” procedures.
If you lose access to a distribution center, you should have steps in your plans that eliminate decision lag and enable you to act immediately to shift capacity across your network.
These procedures are historically oriented around natural disasters, but they’ll still be relevant if the “outage” occurs due to something COVID-related.
These are just a few of the specific actions we’ve used or recommend. Whatever actions you choose regarding potential impacts to your suppliers, technology, personnel, or facilities, make sure to assign specific action owners and remediation deadlines. If you use business continuity software, you may even be able to automate this within the tool.
Step 3: Communicate Actions
Once you’ve analyzed key supply chain risks and assigned owners for needed actions, the next step is to communicate accordingly. This includes both internal and external communications.
Internally, ensure any relevant departments or business units understand actions.
If you trigger new plans or leverage new suppliers, legal and finance teams should be prepared to approve necessary expenses.
HR teams should be ready to onboard new team members.
Field personnel (e.g. drivers or DC workers) should receive explicit instructions on new or existing plans/procedures and should understand their roles and responsibilities in mitigating COVID-related risks.
Where possible, leverage your leadership team to lend weight to these communications: business continuity should always be prioritized, but now is an especially crucial time.
Externally, your organization should engage key suppliers.
Conduct risk surveys or downtime likelihood surveys with existing partners.
Reach out to potential new or alternate suppliers to vet their business continuity capabilities and to begin onboarding them if necessary.
Depending on the nature of your organization’s relationship with key customers, you may also need to draft downstream communications: reassure them that your organization is proactively tackling the pandemic and they can count on you as a trusted supplier going forward.
Looking forward, you should also work with leadership, legal, and communications teams (as appropriate) to draft communication strategies and holding statements. For example, if an outbreak causes DC staffing shortages that will impact shipping expectations, you need to have those communications approved and ready to go.
“But We’ve Been OK So Far. Why Change?”
I’d definitely point to timing. We’ve seen second coronavirus waves, unexpected new strains, and complications with vaccine distribution. To paraphrase a common proverb, “the best time to assign COVID-related actions was yesterday. The second-best time is right now!” Normal plans might cut it in best-case scenarios, but you’re leaving possible strategies on the table if you don’t address the pandemic directly.
Early in 2020, I completed two separate supply chain-related business continuity program implementations for American clients. COVID was still a distant specter at that point. In January/February 2020 (when we were deep in the planning phase), it was “happening” globally, but hadn’t begun to spread within the U.S. Regardless, we decided to use the pandemic as a consideration as we drafted plans and strategies.
This ended up being serendipitous. During the early weeks of the pandemic’s onset in the U.S., these clients experienced issues with workforce outbreaks. Fortunately, their plans had specific information on sanitation providers, minimum staffing figures, outsourced temping firms, and downstream shipment/transportation information. This kind of detail was somewhat above and beyond what we had historically put into plans.
Accordingly, they were able to quickly onboard new staff, implement more robust sanitation procedures, and reroute shipments from alternate facilities to meet the volume needs of their downstream customers. Customer reps were able to communicate effectively so these customers understood how shipments would be fulfilled, even as demand began to spike.
Timing is Everything
Taking time to directly weigh the continued impact on your business will help improve your plans and strategies while decreasing your reaction time to disruptions
Timing is critical and can be stressful during “normal” years, but because of the pandemic, 2021 will be even crazier.
Based on our experiences since COVID began, we recommend three major steps: analyze risks, develop actions to address them, and communicate with internal and external partners accordingly.
If all of this feels too big or you want Castellan’s assistance, please reach out to us! We can overview our consulting solutions or provide a demo of our business continuity software.
We’d love the chance to partner with you to address and solve any problems that these “strange and uncertain times” present to your organization, please schedule a call with our team today.
Josh is a Senior Consultant for Castellan Solutions. During his time at Castellan, Josh has developed and managed business continuity programs for organizations in a range of industries including manufacturing, supply chains, healthcare, and financial services. He has also helped to develop internal guidelines and procedures for Castellan, and has written professionally for Castellan, including articles in the Disaster Recovery Journal.
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