SUPPLY CHAIN RESILIENCE STRATEGY

COVID-19 has disrupted most businesses across the globe in various ways and common to all of these is a
huge disruption in supply chains across the board. For the non-essential category of products, demand has
tanked, and most manufacturing is either at a low or shut down. For the essential categories and ICT
products, demand has spiked and is centered around limited SKUs which are in high demand. Discretionary
buying is at a low.

In addition, manufacturers/sellers in these categories are facing significant disruptions in the raw
material/packaging material supply chains and in order fulfilment due to channel and logistics disruptions. In
a sense, the current situation has broken all the links of the supply chain and compounded the effects of
disruptions in the various parts of the inbound and outbound supply chains.

What lessons are to be learnt from this scenario?

1. While we may not be able to predict or anticipate the scale of such future disruptive events, the
likelihood of them happening is high
2. Supply Chains are the most critical components of any business delivering physical products or
services to customers
3. Few organisations have Business Continuity Plans (BCP) and strategies in place. Even those with
defined BCPs find them outdated and completely inadequate to deal with such a large scale disruption
4. Organisations need to build resilience into their supply chains and develop robust strategies to deal
with the effect of current and future events
5. Such resilience strategies must be developed by reviewing every component of the supply chain and
applying best practices in collaboration with all stakeholders
6. These strategies must be integrated into the mainstream and be reviewed regularly to ensure their
continued relevance and application
7. Technology adoption to manage, navigate and re-align the supply chain is a must to ensure timely and
accurate action driven by data

Challenges – Who, what and how?

There are 5 key types of stakeholders in any business eco-system:

1. The Business itself, it’s employees and resources (Internal)

2. Product Suppliers – Raw material, packaging, ancillary and others
3. Services Vendors – Logistics, maintenance, others
4. Channel Partners – Distributors, Retailers, others
5. Customers – Consumers, B2B Customers, others

The supply chain stretches across all the stakeholders and the effect of the challenges on each of them has a
direct impact on the business. A supply chain resilience strategy has to be developed after considering the
specific challenges each of these stakeholders may face and the consequent impact on the business.

Identifying typical supply chain related challenges faced by each stakeholder and bucketing them is the first
step towards building the resilience framework. Post such an exercise, the list of challenges faced by the
organisation would read somewhat like this:

1. Demand Disruptions:
a. Order Cancellations/Supply Rejections by Customers
b. Inventory Bulges & WC Shrinkage- FG & RM Inventory pile-up, Suppliers keep supplying
c. Margin Shrinkage – Low sales, High Operating & Overhead Costs, Customers demanding discounts
d. CAPEX Unsustainability – Sales Growth vs. Invested CAPEX in negative zone
e. Cash Squeeze – Low AR recovery & high AP payout, other factors affecting cash to cash cycle

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 2. Supply Disruptions:
a. Supply Shortfall/Freeze – High demand, Tier 1 Suppliers unable to increase RM supply, Suppliers
face internal issues and stop/reduce supplies
b. RM Supply Chain Crunch – Tier 2,3..,N suppliers disruptions affecting Tier 1 suppliers
c. Cost Escalations – Suppliers increase RM prices due increase in input costs

3. Distribution Channel Disruptions:

a. Channel Closure – Local restrictions, other external problems
b. Channel Breakage – Distributors/Dealers face internal issues/closure due to disruptions
c. Cash Crunch – Partner disruptions due to non-recovery of customer dues

4. Operational Disruptions:
a. Logistics Breakdown – Vendors unable to cater to demand due to internal/operational challenges
b. Other Services Breakdown – Other vendors for critical maintenance, sub-contractors unable to
offer service continuity
c. People Challenges – Office lockdowns disrupting employee availability/working, blue collar
operational employees, labour, drivers (own and service partners), others absenteeism due to
restrictions, reverse migration
d. Banking Systems outages
e. Technology/ Other Infrastructure outages
f. BCP Strategies not implemented or outdated

These are some key challenges that come up due to large disruptions like the current one or due to smaller
events in the routine course of business. All these challenges affect the supply chain and consequently the
business itself in varying degrees of severity.

A robust and dynamic supply chain resilience strategy can help address such major and minor disruptions
effectively through pro-active actions and timely contingency handling. The strategy also outlines immediate
and long-term actions to be taken to realign the supply chain.

Some key resilience / risk management strategies to address the various disruptions:

Challenges Immediate Term Long Term

Demand  Reassess short term demand – From channel
Disruptions partners and customers, understand impact on
their businesses and build revised realistic
demand plan; review all pending orders; update
and reconfirm all live orders and revised
demand plan with all relevant stakeholders
Supply  Collate & estimate all cash and cash equivalents
Disruptions – Inventory across all stakeholders in the supply
chain, AR/AP with ageing and flexibility, cash &
equivalents
 Inventory/Consumables Obsolescence –
Inventory and consumables in stock at various
locations with ageing/expiry dates and/or likely
obsolescence, contingency planning to consume
or dispose everything with short shelf lives
 Revised supply chain plan – Based on demand
assessment, supplier inputs, other factors
 Redevelop Demand Plan – Develop
complete understanding of market, its
dynamics and develop a fresh demand
assessment framework that can readily
adapt to market dynamics
 Develop new markets, channels & customer
bases for existing and new product/service
offerings
 Reassess/realign product supplier
landscape – Assess Tier 1 to Tier n suppliers
based on criticality, current and past
experiences, availability of alternate
suppliers, environmental & geopolitical
considerations, commercial considerations
 Develop partnerships – Collaborate with all
key suppliers/vendors, invest in them to
help them build capabilities to cater to the
organisation’s requirements, be nimble and
think long term

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Distribution  Communicate & Collate information of all
Channel Channel Partners – Address their challenges and
Disruptions support them to be back in business
 Online focus - Immediately move to working
with institutional and online channels
Operational  Asset/Equipment Inventory – Take stock of all
Disruptions owned assets/ equipment everywhere and their
status due to non-use. Initiate plan for their
maintenance/ upkeep to avoid deterioration
 Review Logistics and Other Critical Service
Vendors Operations – Support/help address
their challenges
 People Status – Take stock of office staff
situation, blue collar workers, labour, drivers,
etc. across own and vendors operations and
plan their back to work strategy
 Address technology/infrastructure bottlenecks
pro-actively
 Reset the production plan – Based on demand
and supply reassessment, people
considerations, other factors. Account for
impact of production related factors and fine
tune
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 Adopt JIT and VMI Supply practices –
Optimise production/supply chain planning
to allow pulling of vendor managed
inventory just in time for production
 Install purchase controls and variable cost
structures – Develop a unified purchase
management function with all relevant
checks and balances, move fixed price
contracts to variable price contracts
wherever feasible
 Vendor Financing Options – Partner with
financial institutions to offer receivables
financing to suppliers and vendors. This will
ensure liquidity for them to improve their
service levels and manage cash flows in
difficult times
 Redesign and restructure Distribution
Channel – Based on experience of
challenges/outages in channel,
reassessment of service and financial
capabilities of key partners, exits/closure of
certain players, revised demand plan
 New distribution strategies - Develop online
direct to customer and direct to retailer as
key long term channels
 Channel Financing Options – Get financial
institutions to offer channel partners
financing against inventory payables to
ensure liquidity for them to grow their
business and also manage cash flows in
difficult times
 Restructure Service Provider Landscape –
Assess existing service providers,
collaborate to realign their capabilities and
develop additional capacity; develop new
vendors; explore and develop other
modes/methods
 Review Technology Framework – Study
existing technology/automation adoption,
develop framework for end to end
technology adoption including for managing
resilience strategies, find best fit solutions,
prepare budgets, plan aggressive but
practical implementation
 Control Rooms – To pro-actively manage
potential failures/contingencies across the
entire operations, provide end to end
visibility to all relevant stakeholders,
manage escalations, ensure best in class
customer service
 Review all contracts - Provide for all
possible scenarios to protect the
organisations interests and ensure all
stakeholders are dealt with fairly. In case of
3

Overall  Update BCP - Review BCP, incorporate
strategies being considered to deal with the
current situation, update and implement
 Address Ambiguity – from various sources about
the external environment, internal
communications/data exchanges – Identify
Champions and develop single source of truth
 Communicate & Collaborate – Increase
interactions with all internal and external
stakeholders & build transparency, strategise
collaboratively on mitigation plans, clear
communication from top management sets
direction
 Develop unified business snapshot – Collate and
analyse data of pending orders, RM and FG
inventory, pending supplies, assets,
consumables, people, cash, other resources,
etc. across entire business and supply chain
 Run sensitivity analysis – On all factors & build
worst case and best case scenarios & plan
relevant buffers/back-ups
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force majeure clauses, define specific
follow-on steps which will lead to clarity
and peaceful resolution of disputes
 CPFRs – Implement Collaborative Planning,
Forecasting and Replenishment frameworks
across all internal and external key
stakeholders. Develop a robust review and
revision mechanism
 Rework product designs and inputs –
Review product design and production to
replace custom/scare inputs & components
with standard/easily available inputs
without compromising on quality, design
considerations and IP
 Study and identify new opportunities –
Disruptions usually provide new business
opportunities which the organisation must
assess and develop as part of the re-
planning exercise
 Build New Business Lines – Develop
auxiliary and ancillary business lines (like a
services business related to the products
sold) to provide growth and de-risk
 Rework production plans – Based on
revised demand plan, suppliers’ landscape,
product designs, etc., rework production
layout/plans, capabilities and retrain
workforce
 Scenario Planning – Run all plans,
assessments, estimations through a
sensitivity and stress framework, fine tune
before starting implementation
 Revised financial planning – Based on the
revised business framework, rework
financial plans, cash flows requirements &
S&OPs
 Realign other organisational capabilities –
Based on revised plans, assess internal
capabilities, infrastructure, frameworks,
organisation structures, etc. and
restructure to manage the new normal
 Implement autonomous and empowered
review mechanism – Key internal
stakeholders who continuously review the
resilience framework, run simulations,
stress test the organisations readiness,
address gaps, dynamically realign plans and
operations
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Key outcomes that can be delivered from the resilience strategy:

1. A Collaborative Framework across all stakeholders for managing business more effectively.
Addressing of immediate challenges/outages at all levels proactively and collaboratively
2. Complete, realistic, and real-time visibility across the entire supply chain
3. Understanding of challenges faced by your customers, suppliers, vendors, employees, other
resources, and their impact on your business. Mitigation strategies to minimise such disruptions
4. Complete, current and realistic demand, supply and production plans for the immediate term.
Framework for long term and dynamic business planning
5. Implementation of long term best practices across the organisation and the supply chain
stakeholders
6. Realignment of supply and distribution channels, development of new channels
7. Assessment and identification of new products and business lines
8. Implementation of a robust technology framework across the organisation integrated with external
stakeholders
9. Development of a long term Supply Chain Resilience and Business Continuity Plans managed and
kept current by an empowered team to keep the organisation ready to deal with future outages

While most of the resilience strategies work on basic principles of business and financial management,
organisations in their BAU working and high growth periods tend to bypass and overlook these as being
tedious and irrelevant since they may not offer direct outcomes related to the current goals/targets. Many
of these practises are often perceived to be limiting to business growth. Only in times of difficulty reality hits
home when organisations are not prepared and rush to react, often loosing considerable ground in the
process.

Since such detailed resilience frameworks are difficult to implement in the BAU environment, they usually
require the intervention of external specialists coupled with internal champions to manage the
implementation and take it to a complete and logical conclusion.

The most important role in this strategy is played by technology and automation. The resilience strategy
requires the organisation to adopt, enhance and realign their technology landscape to ensure successful and
sustainable implementation given the extensiveness and scale of this exercise. This entails a study and
redesign of the organisation’s technology implementation across all functions.

Technology adoption also allows for the level of dynamism required for real-time planning/ adjustments
using actual and relevant data points. An obvious parallel outcome of this entire effort is to create a more
seamless, smarter business organisation in the BAU.

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