I remember standing in the temperature screening queue in Doha. As the line wound around multiple stations, my backpack cut into my shoulders. I was tired and cranky as I read the overview of MERS. As an United States resident, I was blissfully unaware of this virus and worried about catching my flight to Singapore. My ignorance of a potential pandemic was low.
Changing My Mental Model
The Middle East Respiratory Syndrome (MERS), first reported in Saudi Arabia in 2012, didn’t make headline news. Likewise, I watched the coverage of SARS, H1N1, and Ebola from my TV screen. As the COVID-19 saga unfolded, this was my mental model. My first articles dealt with the virus as a Chinese localized phenomenon. My jaw dropped when a friend became ill in Dallas in January from a visit to Dubai. I never conceived that it would become my reality. Shifting from being an observer to being in the middle of a pandemic was surreal. My fever of 102 and the subsequent chills were my reality in mid-March. My work life quickly shifted from the go-go-go lifestyle of client travel to a slower pace in the home office. I thought that the shutdown would be quick. I now know that it will not be. Changing my mental model was a challenge.
We now know that COVID-19 impacts are far-reaching and long-lasting. The market is adjusting to not only the shifts of the shutdowns, but also the economic uncertainty. Unlike the prior supply disruptions, there will not be a new normal. Instead, supply chain leaders face wave after wave of disruption until there is a vaccine. The market shifts will be many and local. As a result, much of what we have learned as a supply chain best practice is no longer applicable. Changing mental models is tough.
The fall is especially problematic as we work through the gyrations of the hammer and the dance. Let me explain. The dance starts as people leave their homes and start to socially interact. With the lack of social distance, hot spots will emerge and the hammer will fall. When the hammer falls, populations will scurry back to their homes. How does this affect supply chains? The response will be local and erratic.
In this time of uncertainty, focus is essential. Part of the work for a business leader is defining where to focus while identifying what teams can stop doing.
In my prior articles, I have written extensively on the need for outside-in demand sensing processes based on market consumption data. I have also written about the need for supplier development programs and building robust supply chain capabilities in value networks. (I list these articles at the bottom of this post for reference.)
In this article, I am going to take a different tact and share a list of processes for companies to stop doing. I think that this is important now because work teams are stressed, and many companies are downsizing. As a result, focusing on what can drive success is critical.
What can we stop doing? The first step is to stop traditional demand planning processes based on conventional order pattern modeling. (This is the normal ouput of the conventional Advanced Planning models.) The modeling of historic order patterns is worthless through the pandemic. Why? The sales order pattern is no longer a predictor of future demand. Instead, invest in market sensing and the use of market consumption data. Attempt to read market shifts as they happen, reduce latency to read the signal and hone processes to drive a response. Demand latency reductions are critical to syncrhonize the response.
The second process to stop is collaborative sales forecasting. Collaborative sales forecasting started two decades ago with the belief that sales forecasting could help improve demand output. For most companies, even in good times, this was not the case. During the pandemic, collaborative sales forecasting is just a waste of time. We need to align the supply chain to market data.
The third process to stop is the use of Syndicated Data in consumer products for revenue management. While syndicated data will still be useful in evaluating market share, the use of syndicated data for revenue management and trade promotion management is not relevant. The issue? The lack of granularity and the latency of the data due to processing. The answer? Invest in a data lake to evaluate revenue management strategies and assortment planning based on the market. Redefine trade practices. A buy-one-get-one free (BOGO) promotion makes no sense if the shelf is bare.
The fourth process to stop Request for Proposal (RFP) processes. Transportation RFPs are particularly problematic. The reason? Logistics is a constraint and is unpredictable. A transportation RFP is a waste of time—instead, partner with logistics service providers. Get regular price updates and model the impacts using supply chain strategic network design modeling technologies. Get good at modeling and build agility into your network.
The fifth process to stop is the execution of supplier management processes that usually include the elongation of payment terms and the use of third-party service firms. Get close to your suppliers through supplier development programs and shorten payment terms to improve business continuity.
The sixth step is to stop the current Advanced Planning and Enterprise Resource Planning projects. At this time, they add noise to an unstable system. Instead, invest in new forms of analytics to improve visibility and prescriptive analytics.
The seventh step is to put as much emphasis on S&OP planning as on execution. Few companies are good at S&OP execution. Stop planning in isolation and align for effective operational execution.
Why are companies not good at S&OP execution? It is merely a matter of focus. Companies run out of steam because S&OP planning is so arduous, and the plans never get executed. Now is the time to build playbooks and continually align demand and supply. Shown in Figure 1 is the current state of S&OP execution.
Figure 1. Sales and Operations Planning Status on S&OP Execution
In closing, let me leave you with some thoughts. The pandemic is the result of a novel virus. Today, when it comes to supply chain practices, we have more that is unknown than known. What we stop doing will give us resources to focus on managing the supply chain in these uncertain times.
Last week, as I drove for my plasma donation, I was feeling quite blue. (I am part of the red cross COVID-19 blood serum project to get serum with antibodies to sick patients.) I miss travel and facilitating work teams. The walls of my home office are closing in on me in the afternoon. I am tired of watching news programs and I worry for the larger economy. But as the day ended, I had two great discussions with two new start-ups using analytics to sense flows and translate demand and supply. I went to bed on a brighter note that maybe, just maybe, as supply chain processes adapt through the pandemic, we will drive a step change in improvement. At least, this is my hope.
Let me know your thoughts, and good luck. Let me know if I can help.
Prior articles that might help:
The Global Supply Chain Needs a Shot in the Arm
Strong Supply Chains Needed for an Economic Rebound
Help Supply Chain Planners Be More Successful in These Uncertain Times