Prepare for the inevitable
In a 2010 HBR article titled “Roaring out of Recession”, the authors analyzed data from three different recessions (1980,1990 and 2000) to evaluate the impact on public companies. One interesting finding from that study was that out of 4,700 public companies studied, 9% of the companies not only recovered from Recession-they actually flourished after the recession. Further peeling this finding, they determined that this positive outcome for this selected group of 9% companies was due to the preparation that they have done for Recession. Rather than wait for the Recession and then get into the survival mode, these companies planned for it proactively, while things were still rosy.
Unfortunately, COVID-19 seems to be leading us towards a Global recession. In addition to preparing to manage your operations during the epidemic, now is the time to also start preparing for any resulting recession.
There are many strategic approaches that a company can take in totality to brace itself for Recession and come out of it with a competitive edge. This article will however focus on this topic from a Supply Chain perspective and explore few ways Supply Chains can prepare themselves for Recession.
Start building your SWAT Team
Now is a good time to take a careful look at your Supply Chain org structure. If your organization has struggled during this epidemic, there are more reasons to do so.
Challenging times require individuals who can think unconventionally, yet strike a balance between business needs and operational realities.
Making sure that you have right individuals heading critical Supply Chain entities like manufacturing plants, distribution centers, Supply Chain planning and Supply Chain analytics. You not only want the individuals with right skill sets and decision making acumen leading these entities, you also need to make sure that the individuals go along with each other. Supply chain is an extremely interconnected entity and in times of crisis, collaboration among leaders is extremely important.
Develop Agile processes
Start analyzing your critical Supply Chain operating processes for robustness. A good example is your Sales and Operations Planning (S&OP) process. Making the process Agile in simple terms means that your process is flexible enough to react to changes happening in a dynamic yet efficient ways. The process is always in a fluid state, where any changes that need to be made to the process to accomodate any changing realities and be accomodate quickly and seamlessly.
This also ties with the necessity to collaborate mentioned in the SWAT team approach above. Critical Supply Chain planning processes, like S&OP, which interface with multiple stakeholders, need not only the process to be agile, but also require close collaboration among the individuals leading the teams involved (Marketing, Manufacturing, Distribution, Transportation etc.).
Proactively evaluate your Supply Chain footprint for consolidation opportunities
Shedding assets that underutilized is a good way to reduce operating costs, increasing Return on Assets, gain operational efficiencies-and all of this can be done without cutting any core aspects of operations.
The best time to evaluate your Supply Chain footprint for any consolidation opportunities is now- before Recession hits. Facility consolidations and transitions are time intensive projects. Undertaking such a study during Recession and then executing it may be challenging so the time to get a headstart on it is now. A Network optimization study can help you with this kind of evaluation.
Organizations that have already invested in Digital technologies and analytics in their Supply Chains have already created a performance gap between them and their competitors. Continuing to leverage these during Recession will help these companies widen that gap during the Recession. If you have not jumped on the Digital bandwagon yet, it still may not be too late to do that. Remember that technology, when optimally leveraged, have operational efficiency aspects as well.