Thursday 1 October 2020
 
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ANALYSIS

Zero-based supply chain ‘key to spur Covid-19 recovery’

MANAMA, July 21, 2020

Applying a zero-based lens across the supply chain provides the visibility needed to make deployment and cost containment decisions, identify opportunities for immediate relief and risk balancing, and execute with resilience, a report said.

A Zero-based Supply Chain (ZBSC) provides the building blocks to accelerate this journey rapidly. By radically shifting cost curves and boosting performance across the supply chain, businesses can create new value to fuel sustained growth in the Never Normal world, added professional services firm Accenture in its report titled “Zero-based Supply Chain: Accelerating COVID-19 recovery”.

Ensuring resiliency now for success in the future means companies need to prepare supply chains and production networks to balance reliability with responsiveness. Businesses must not only act now but also plan for future disruptions to protect cost of goods sold (COGS) and margins in the Never Normal world.

Covid-19 disrupts supply chains everywhere

No industry, geography, or channel has been spared from supply chain disruption as the Covid-19 pandemic has spread, said the report, warning that pressure to manage supply chain costs will increase.

According to the report titled, the range of supply chain impacts is long and varied:

•    Demand drop-off (food service, fashion apparel)
•    Demand spike (health/hygiene/personal care goods)
•    New/shifted demand across channels (on-premise vs. grocery retail)
•    Lower operational productivity (health and hygiene requirements, government-mandated shutdowns)
•    Stranded inventory, drastic over/under stocks
•    Raw material/input stoppages or shortages

Managing supply chain costs

COGS contributes 40 to 70 percent of a business's cost base.

Covid-19 has disrupted end-to-end value chain, with challenges every step of the way: Sourcing raw material production and logistics; manufacturing during plant shutdowns and social distancing; and delivering amid reduced warehouse operations, and transportation restrictions.

What to expect in the Never Normal supply chain

•    Changing consumer behaviour will affect what, where and how goods and services are delivered amid social distancing and move to online ordering.

•    More unprecedented events are expected, demanding a more reliable and flexible supply chain to shift in response to changing impacts across the supply ecosystem.

•    Cost structures will move from more fixed to more variable, with investments in accelerating digital transformation and investing in areas to build ability.

•    Visibility and analytics will be essential for companies to focus efforts, drive scenario planning, and rapidly respond to changing consumer demand.

Preparing for uncertainty

Amp up on-demand visibility:

•    Build a robust mechanism to understand demand patterns
•    Create on-demand visibility for scenario planning
•    Establish an intelligent control and monitoring capability

Rethink costs:

•    Begin thinking about "should-cost" models
•    Challenge historical costs in the Never Normal
•    Focus on changing organizational mindset on must-have versus nice-to-have capabilities

Supercharge ecosystems – Establish ecosystem and digital capabilities to go asset-light:

•    Ramp up the digitization of capabilities across the ecosystem, allowing cost to be more variable and on-demand. – TradeArabia News Service




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