COVID-19 – where next for supply chain?
Beyond the human tragedy of Covid-19, the first half of 2020 taught us all a lot about ‘agility’ within our supply chains. The rolling impact of manufacturing and retail shutdowns combined with travel and consumer restrictions, impacted consumer demand and disrupted the channel mix. New requirements for PPE and social distancing created sourcing and operational challenges that will remain with us in the coming quarters.
For many companies, the first half of the year is traditionally quieter and as we prepare for the ‘Holiday’ season there are several areas that may require attention:
- Assess operational capability and consider actions to manage capacity and diversify risk – particularly in areas such as eCommerce and final mile delivery. Parcel demand rose by over 60% between March and June 2020, which will put pressure on the entire chain in managing a seasonal peak on already inflated demand.
- Adding additional delivery options can improve consumer choice and create opportunities if individual partners run into difficulty
- Improvements to order status visibility can proactively manage customer communications and expectations at peak times
- With uncertainty remaining, planning will need to accommodate a range of demand scenarios
- Managing a slightly reduced product portfolio can allow for more flexibility in inventory policy without increasing overall exposure
- Reduction in range can also drive operational efficiencies and can assist in managing social distancing requirements.
- Develop Covid-19 impact scenarios on key in house and partner operations.
- Most companies have already taken precautions to minimise the risk of infection. Consider extending this to include contingencies in the event of the need to temporarily close key operations in the case of infection.
- Engage with partners to understand their policies and how decisions would be managed and communicated.
Thinking beyond the short-term impacts, companies will want to consider how their supply chain reacted to the disruptions caused by Covid-19.
- The scale of disruption to global supply chain operations from Covid-19 is beyond what many would have anticipated within previous risk planning. In many respects the scale of the pandemic tested the limits of existing risk plans and many will have been found wanting.
- Companies may need to develop a more systematic approach to risk and resilience planning within supply chain operations and there are several useful frameworks that can be considered in that approach.
- A refreshed assessment of supplier and customer risks may be required to understand the financial toll taken in many sectors from the pandemic
- There may be some capabilities, developed to deal with the uncertainty of Covid-19 that companies will want to take forward into future supply chain processes.
- 2020 has seen an acceleration in a shift towards digital channels – much of which may continue beyond the immediate impact of Covid-19.
- This will require an alignment channel strategy and operational capabilities to meet this demand.
- There have been several casualties within high street retail and a rethink of role of retail within the customer purchase experience will need to be developed.
- The changed economic landscape is likely to drive a more urgent need to accelerate transformation to improve cost to serve or to take advantage of emerging market opportunities
Lorcan Sheehan speaks to Tom Raftery of the Digital Supply Chain Podcast on how businesses are coping with risk and resilience in their supply chains.
Click HERE to access the Podcast
We participated in a number of new webinars on Brexit, Covid-19 and eCommerce strategies that are now available on the newly created PerformanSC youtube channel.
Brexit - latest status
The UK formally left the EU in January and on the 1st January 2021 the transition period which effectively maintained the status quo from a customs and trade perspective comes to an end.
From January 2021:
- Shipments between the UK and the EU will become third country shipments requiring customs formalities for all imports, exports and transit shipments.
- Special rules will apply to Northern Ireland which will allow free movement of product north and south on the island of Ireland but there will be some formalities required for shipments between Northern Ireland and the rest of the UK.
- The UK will lose the benefit of the existing free trade agreements between the EU and the rest of the world, but it is free to independently negotiate its own trade agreements.
- UK and EU materials will no longer be considered as a common origin which may impact final product origin for trade purposes
- In the absence of a UK – EU free trade agreement, shipments between these territories will be the subject of WTO tariffs and quotas. Progress on such an agreement has been stalled for some months and if an agreement is reached, it is expected to be more limited in scope than the original ambition.
Many companies have already conducted extensive preparations for the customs formalities associated with Brexit. For those that find themselves less prepared we would suggest the following minimum actions:
- Ensure that your company is registered to trade with the relevant customs authorities
- Engage with suppliers, customers and logistics providers on the impact to shipments post 1st January 2021 and ensure that there is clarity on:
- Which company will act as importer and exporter of record?
- The incoterms in place for trade which will define the responsibilities of the buyer and seller in each transaction
- Who will prepare the necessary customs paperwork and the costs associated with this administration?
- The source of information around tariff codes, origin and valuation that will be required for customs paperwork
- Potential to buffer for delays once the transition period comes to an end
- Train key supply chain, logistics and finance personnel on customs matters, company and individual responsibilities.
- We have developed a variety of courses that can be delivered online including a Brexit essentials series that can be tailored to your individual company needs
- Explore potential exposure to tariffs and consider whether the application of special customs procedures could be of benefit to mitigate against the expected changes.