Coronavirus and lessening the impact on our supply chains

How one of the world’s leading bottled water companies faced up to the challenges of supplying the thirst of China in the face of the coronavirus outbreak.

As the coronavirus crisis deepens, here are some insights from the CEO of supply chain planning software vendor, FuturMaster, on the impact of the virus outbreak and how companies can anticipate and react to such crisis situations based on the lessons learnt from various customers – including one of the world’s largest suppliers of bottled water operating in China. With many of its clients in Europe worried about the impact on their supply chains, company founder and CEO, Bo Zhou, sheds some light on how manufacturers and retailers can do more to mitigate risks and avoid too much disruption.

The impacts on Chinese businesses, manufacturing and retail:

The impact of the coronavirus has been huge to Chinese business. For one of FuturMaster’s beverage customers, sales in February were down 80 percent compared to last year. For a fashion client, it was only able to achieve about 30 percent of like-for-like sales thanks mainly to online, which has remained relatively resilient.

There still remains a lot of trepidation around consumer demand. Short-term demand from end-consumers has fallen sharply. And due to so many people being quarantined at home, the geographical distribution of demand has also changed. A lot of demand shifts online.

“During times of such uncertainty, every company needs to make simulations on how demand may evolve and if and how they can satisfy this demand based on their production and warehouse capacity. You also need to closely monitor which transportation routes are cut, or how many workers will be unable to show up at various sites due to lockdown. For many companies in China, the problems were compounded because they don’t have the technologies to support these simulations; so they’re unable to anticipated demand and supply by looking at multiple scenarios,” said Zhou.

On food shortages and empty shelves:

Panic buying – where many UK supermarkets have already seen empty shelves from people buying up all the bottled water, hand sanitisers and toilet rolls – and further stock-piling is likely to test suppliers to the limit. Food and manufacturing companies in Europe face many challenges from the impacts of the coronavirus.

However, sourcing materials may not be the biggest problem on the supply side. Companies are also seeing reductions in their production and warehousing capacities due to labour shortages: for instance, when one worker tests positive, the whole team has to be put into quarantine.

Moving products around can turn out to be an issue as well, especially when transportation routes are affected due to border closures.

“During the crisis, companies need to produce more with reduced resources. This is made possible by optimising the production by reducing set-up times. Manufacturers also need to produce more efficiently: having updated demand planning data allows you to produce only what is most in demand and profitable,” Zhou said.

“Anticipating ahead – by doing simulations – enables companies to be better prepared. Being able to react in an agile and efficient way is vital for coping with any crisis situations.”

“Everything that seems normal everyday becomes totally impossible. For many businesses, you might need to find another logistics network. You have to focus on where’s the best factory that you can produce in and look closely at costs and feasibility. All the normal variables that supply chain planners use on an everyday basis become uncertain and questionable. But you can act with foresight to mitigate risk.

“In times of panic – and against a backdrop of empty shelves – some digital technology can be used to avoid a crisis. Digital technology can help make better decisions afterwards and prioritise things whenever there’s a choice to be made,” added Zhou.

On supply chain technology, AI and machine learning:

“In times of extreme uncertainty and volatility in demand, digital technology can certainly make sense of a multitude of data, quickly and optimally. This requires a supply chain planning tool that’s highly flexible and data-driven. Ideally, you need to be able to manage as many variables as possible to get more accurate forecasts on demand and optimise the supply accordingly. It’s something that would normally take days to do manually. And a machine is often much better than humans at crunching numbers and making decisions from wades of information.”

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