Yesterday the President of the United States extended nationwide social distancing guidelines for another 30 days.  Our lives and our supply chains are disrupted not only by the pandemic, but also the resulting Great Sequestration.  How should our supply chains adapt to these times and prepare for what comes next?

As most everyone else is, I am sequestered at home, washing my hands frequently, and just going out for essentials. While I’m sequestered, I’m also thinking about how this is going to impact the companies and industries I regularly work with. Not only how to manage the current disruption, but also how to prepare for the future.

After being in touch with multiple clients and industry organizations, I see three essential components to success when coming out the sequestration.  It doesn’t matter whether you are in Senior Management, Demand Planning, Supply Planning, Procurement, or anywhere else in the supply chain, these three things will be essential in how well you weather this crisis.

• Frequent Communications
• Flexible Contingencies
• Forward Continuity

Frequent Communications

We already live in a world that’s very interconnected.  Imagine what this would be like without all the digital means of communicating such as video meetings, e-mail, chat, etc. We all need to intentionally leverage these tools to communicate even more than ever.  There was value in those informal meetings in the hallway, or at the water cooler or the coffee pot.  We must replace those informal meetings with intentional communication to stay in touch.

Communicate with your employees. Let them know you care. Assure them that their safety is your primary concern.  Without them, you wouldn’t be the company you are.  Extra and intentional communication is vital to maintain morale and engagement in these uncertain times.  Keep them in the loop and get their input as you make plans to respond to a constantly changing environment. 

Communicate with your customers and suppliers.  Let them know you care. Learn how they are impacted and how they are responding.  What are they expecting to happen in their industry?  How are their operations impacted?  How are their customers impacted? How are their suppliers impacted?  How can you help suppliers and customers get back on their feet? Keep in touch often to let them know how you are adapting and to keep up with their changing plans.

Communicate with all your Stakeholders. Let them know you care. Share how you are impacted and how you are adapting.  Do you see a pattern here?  Learn how they are impacted and how they are adapting. Keep in touch often as your plans and their plans change in response to unprecedented uncertainty.

Increased communication is a must to assure everyone is coordinated as plans continue to adjust to changing situation.

Flexible Contingencies

You’ve probably already had to make significant changes to your plans more than once in the past two weeks.  Be ready to change them again and again. 

Develop a range of plans going forwards. Consider the different events that might further impact your supply-chain.   How will you react if one of your plants must close?  What if a key supplier or distributor closes? What will you do differently if the stay-at-home orders last only a few weeks or extend to a few months? What if it varies by region? What if sequestration is released, and then re-imposed? Carefully consider alternatives and the unpredictability of how long this is going to last. 

Understand your end consumers.  How are they impacted.  What are they doing differently?  How will they be affected as the virus spreads? How will they react when stay-at-home orders are lifted?  How will they react when stay-at-home orders are imposed again?

Increase your Nimbleness.  Flexibility is more important now than ever before. Forget about your budget.  It was out the window as soon as consumers started changing their behavior due to the pandemic and stay-at-home orders.  

Consider what it takes to be nimble in response to a rapidly changing business environment.  Some options to be nimbler include:

• Changing the cadence of your S&OP and demand planning cycle to respond more quickly to changes. Maybe you used to update your plan monthly, but that is not going to be responsive enough now.
• Building inventory of products that you know are likely to be in demand to protect against possibility of your production being disrupted.
• Temporarily suspending production of low margin and low volume products to focus on what consumers want most.
• Building inventory of materials to allow greater flexibility to change production schedules as demand changes and to protect against disruption of your suppliers.
• Deferring non-critical decisions and expenditures.

Flexible Contingencies are essential to help you be ready to adjust to the continually changing situation.

Forward Continuity

There is a limit to the duration of the current distress.  Eventually we will stabilize to a ‘new normal.”  Some aspects of life may be as they were before the pandemic.  However, just as there are bombed out buildings remaining after a war, there will be some businesses that fail and some industries that change significantly.

Prepare for the new normal. Find new ways to learn about and understand your end consumers.  The current disruption adds a tremendous amount of noise to the demand signal at every layer it passes through.  Only by understanding the end consumer will you be able to predict future demand with any accuracy.

Focus on market opportunity and supply reliability. For the time being, forget about traditional metrics such as Forecast Accuracy (or MAPE), Overall Equipment Efficiency (OEE), and Purchase Price Variance (PPV).  Only once new steady-state is reached, will these be meaningful again. 

Document everything. Capture all the data you can get your hands on.  With the right tools, you will eventually be able to correlate the impact on your demand with various events, such as stay-at-home orders in various states.

After this is over, be sure to capture lessons learned. Evaluate how you handled this crisis, what went well and what you might do differently next time.  Do not rely only on employees to learn from the experience. Capture their learning in a formal process that builds a playbook for the next supply chain disruption.  

Prepare for the next disruption. COVID-19 is not the last crisis we will face. There will be new complex crises in the world. Prepare your supply chain to be ready. If you haven’t already done so, map your supply chain so you’ll know who and where your suppliers are, and their suppliers, and their supplier’s suppliers. Look into new tools that use Artificial Intelligence and Machine Learning to quickly spot changes in demand and supply.

Consider changing to a Demand Driven planning model.  The current crisis underscores the fact that we are living in a Volatile, Unpredictable, Complex, and Ambiguous (VUCA) world.  VUCA conditions are, by definition, difficult to predict. Traditional planning methods based on historical demand patterns will not help you be prepared for quickly changing or unexpected conditions.

Forward Continuity is about preparing for life after this disruption, and about being ready for the next disruption.

Frequent Communications, Flexible Contingencies, and Forward Continuity are all essential to how well you weather this crisis. Frequent Communications will keep people working towards the same purposes in a rapidly changing environment.  Flexible Contingencies will help prepare you for the changes that are coming quickly. Forward Continuity will help you transition to life after this crisis and prepare for the next one.  Do all three and you have a better chance of a healthy supply chain that survives this crisis.