Every day, on calls with Cleo customers, I am learning first-hand how leading supply chain-driven businesses are adjusting in response to the COVID-19 pandemic. I thought it would be helpful to share some of the remarkable insights – from manufacturers, wholesalers, and logistics companies, to retailers, food production and health care-related businesses -- and how they are responding. Their agility is so remarkable we’ll be doing a series of blogs about it.
As always, please reach out to me on LinkedIn with any questions or comments that you might have. And refer to Cleo’s COVID-19 FAQ guide for more suggestions to help you navigate these difficult times. Hope this helps everyone think differently.
Blog #1 - Food Distribution Industry
Supply chains everywhere are experiencing a tremendous amount of strain, much of it due to the grave dependence on China for supplies. According to Deloitte, as many as 200 of the Fortune 500 companies rely on suppliers in the Hubei province in China, the epicenter of the COVID-19 outbreak.
One of our customers, a large food distribution company with a complex global supply chain, one created through years of supply chain planning and backed by world-class B2B integration capabilities, was able to take action extremely fast when the news of the coronavirus first hit. By taking action ahead of the pandemic, this company managed to proactively order supplies from China, Spain, and Italy, get ahead of the curve, and smartly position themselves to meet the growing demand for their products as the pandemic gains hold in the United States.
Because they had the visibility, agility and business foresight to do this, this company is now seeing a massive spike in demand, to the tune of 3x-5x normal order volumes at their distribution centers. As the crisis continues, they’re taking each day as it comes.
A key decision they’re making each and every day is in prioritizing the execution of the demands by favoring essentials such as milk and eggs over non-essentials such as ketchup. While the short-term panic buying will subside in the next few months, there is no doubt a fundamental shift has occurred with consumers favoring healthy eating and personal hygiene, with a larger tangential preference toward home cooking versus eating out. These shifts bode well for food distributors especially those that focus on natural foods that foster healthy life style.
Despite the uncertain times we are living in, and the amount of volatility that has sent crippling effects to supply chains everywhere, how was this food distributor able to keep its head above water?
This is a classic example of just how important supply chain agility and flexibility really is. Traditionally, supply chain management was most heavily focused on lowering costs, reducing inventories, and increasing asset utilization. Now, the shift in focus to efficiency alone has exposed the true lack of resilience in so many global supply chains, and this situation has grown only more pronounced since the coronavirus outbreak first occurred.
Those companies who -- like this food distribution company – have the built-in agility to plan ahead, and whose supply chain planning experts and integration platforms are working together as they should, are proving they able to respond faster to supply chain disruption than their competitors. And that will make them winners over the long haul.
Where do we see things headed as far as technology goes for these consumer-focused industries? I see three trends emerging:
- Consumers are continuing to buy online, which will cause an accelerated shift to digital channels.
- Companies without a sound e-commerce strategy are putting themselves at a great disadvantage.
- Businesses will prioritize supply chain flexibility, execution, and business process integration over other technology investments because this crisis has shown the need for agility throughout supply chains.
What we learn from this food distribution industry story is that at many companies the single biggest deficiency inside their supply chain is the lack of integration technology that connects all of the supply and demand nodes. Without it, they don’t have end-to-end visibility across their business processes. They don’t have the agility to turn on a dime.
Businesses that do recognize the role that integration technology can play in keeping them resilient are the ones who will remain robust and agile by leveraging a modernized integration platform.