Globally the COVID-19 numbers have surpassed 700,000 and the death toll of 30,000. It has been abundantly clear that lockdowns and testing en masse are the only methods to contain the spread.
By Vijay Kasi
Globally the COVID-19 numbers have surpassed 700,000 and the death toll of 30,000. It has been abundantly clear that lockdowns and testing en masse are the only methods to contain the spread. India’s 21-day lockdown of 1.3 billion people came much earlier in the spread than similar ones across the world. The Prime Minister’s Office made it abundantly clear right at the beginning that “essential commodities” will not be disrupted during the lockdown. Essential commodities are relatively easier to define as the term relates to items for survival such as food and personal care. However, the challenge arises as the typical supply chain extends across industries and companies. An essential commodity supply chain extends to ingredient, chemical, agriculture commodities, packaging industries as a typical FMCG production requires over 100+ products from other industries.
The lockdown experiment, as we are calling it, is presenting challenges to FMCG companies who might have taken availability of a packaging material or an inbound truck as granted. In this time of crisis when we don’t have any historic parallel to refer to, we cannot be entirely sure how long this pandemic will last or the extent of the disruptions it will cause. In all probability, this will run into months (as opposed to our earlier estimate of weeks) considering that national lockdowns may ease but regional/geographic lockdowns in hotspots may still be required.
To ensure it is an easy recovery and build the preparedness to stay ahead in the curve, it is critical for FMCG companies to create an Emergency Response System (ERS). An ERS can be assumed to be a war room of sorts to manage the current situation and ensure the supply chain functions without a glitch. To elaborate the concept a bit more, an ERS is a temporary governance and execution structure that transcends divisional and business lines to minimize disruptions. Disruptions can be classified into supply base disruptions, internal operational disruptions and demand unpredictability. Here is what an FMCG organization can do to not just survive, but continue to operate at its optimum, while building the preparedness to win after the pandemic is over.
Set Up an ERS, pronto
An ERS will put all key functions together to combat the crisis successfully. Its primary focus is to ensure that day-to-day operations run smoothly for the duration of the crisis and the impact to production and distribution of goods is maintained at a minimum. Therefore, the ERS is the most important central body that an organization can set up for decision-making, coordination and communication.This cross-functional team is usually led by the Head of Supply Chain or any other leader that has the decision-making rights to take necessary executive calls. The core team should include teams from operations, logistics, commercial and procurement.
The procurement team’s primary purpose would be to work with suppliers to understand the manufacturing capacity, inventory on hand and in-transit. They will need to understand the availability through alternative suppliers. The operations team will be required to provide input on the likely production capacity based on the demand forecasts and supplies on hand. And the role of the logistics team is critical as it will need to ensure the availability of trucks for inbound and outbound materials. The commercial team will be required to manage customer communications.
Understand and monitor critical supplies and services
The cross-functional ERS team should be equipped to understand the supply exposure. One way to do it is by reaching out to suppliers to understand the stock availability. For instance, the FMCG organization can check with the packaging Tier-1 supplier to make sure they can obtain laminating films, but also with the Tier 1 packaging supplier to ensure it is able to obtain plastic raw materials from its Tier 2 supplier. Likewise, it is essential to understand the status of logistics support necessary to obtain the supplies and deliver the shipments to the distributor/customer. Consider a situation in the current times when the finished products are ready, but the organization realizes that the logistics is not ready. Therefore, it is critical to understand this supply exposure and explore alternative suppliers to obtain the necessary stock.
Develop mitigation strategies.
As part of the ERS’s activities, a clear dashboard is designed to understand the demand, production requirements, supply requirements and available inventory, stock-in-transit and available stock at suppliers are displayed against each. Daily meetings and reviews are set up to review the scorecard to prioritize the SKUs/customers to ensure disruption is well managed. A significant number of trade off-related decisions are expected to be taken and they may be related to SKU mix, alternative parts/supplies due to non-availability, alternative modes that need to be deployed and many others. And the executive team in the ERS will be required to take the tough trade-off calls to get through the situation. Therefore, the ERS leadership required a very high-level of experience and understanding of the crisis and the impact.
An ERS is a temporary governance structure and should run only until things stabilize. After it is officially agreed that the crisis has been managed effectively and the ERS is not required anymore, the structure will need to be disbanded. In the current scenario, unpredictability has been the core ingredient of COVID-19 since it started in Wuhan, China, way back in December. And it is possible that very little will change in the next few weeks and months. Therefore, it is important for companies to establish systems and processes to manage this unpredictability so that they can survive and thrive. The broader lessons learnt should be incorporated into the organization’s ethos for the future. The learning from the current disruptions will set the base for new norms for this overtly connected world in the foreseeable future. In the words of John F Kennedy, “The Chinese use two brush strokes to write the word ‘crisis’. One brush stroke stands for danger; the other for opportunity.” What is noteworthy that in a crisis like this we are aware of the risks and are battling them. But at the same time organizations are aware that there are opportunities at the end of the tunnel, and they need to be prepared to make the most of them.
(The author is Principal, Kearney, Global Consulting Management firm. Views expressed are personal.)