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  May 9th, 2021 | Written by

Health Crisis: The 4 Challenges Facing the Supply Chain

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  • The health crisis has finally shown the limits of ultra-globalization.
  • Faced with these constraints, companies have a duty to improve the elasticity of their supply chain.

The health crisis is putting the logistics chain to the test in particular. Reduced visibility, need for flexibility or even international disruptions… The challenges facing logisticians for this new year are numerous and it will be necessary to be particularly vigilant to meet them properly. Here are our ideas for making 2021 the necessary rebound year.

1 / A lack of visibility that needs to be filled

Since the start of the health crisis, the entire supply chain has faced a lack of visibility. Many activities are slowed down or even stopped, directly or indirectly impacting all players: from the manufacturer to the customer, including distributors. Companies also have to face a regulatory environment that is both blurry and shifting. Result? It is almost impossible to plan medium to long-term actions, especially when it comes to international trade. A situation that is all the more complex as the measurements fluctuate over time and across countries. At present, it is therefore difficult to predict which suppliers or customers will be able to continue their activity and, therefore, to prepare for them.

The first challenge for the actors of logistics management is therefore good to gain visibility on their activity, and not only in the short term. To do this, several avenues are possible:

-strengthen communication, transparency, and collaborative work with the various players in the supply chain;

-work in synergy with companies in the sector in order to have more weight vis-à-vis public authorities and regulatory decisions adopted

-acquire new tools to better anticipate risky situations (reporting, automated alerts, predictive software, etc.).

2 / A need for elasticity and greater flexibility

The current crisis has highlighted one of the main pitfalls of the supply chain: its lack of flexibility and adaptability. For companies unable to quickly adapt their activity to the reality of the situation, the consequences have been serious and varied: stock shortage or increase, shortage of raw materials, volume of labor unsuited to the volume of activity, inability to fulfill orders, longer delivery times, etc. These logistical difficulties have not been without consequences on the financial health of companies. Many have had to deal with a decrease in their cash flow, order cancellations, but also an increase in the cost of storage and transport.

Faced with these constraints, companies have a duty to improve the elasticity of their supply chain. Although the challenge is great, it can be met step by step.

-Adapt the activity: reduction in the number of suppliers (or even single sourcing), reduction of the workforce, limitation of empty transport, local procurement, creation of new services (click and collect, express delivery, etc.) … So many possible avenues for the activity to better respond to current constraints and challenges;

-Develop logistics practices: the supply chain must also become more flexible and, to do this, several avenues can be investigated. Just-in-time work with a view to limiting working capital requirements, cross-docking to reduce stock, cycle counting to facilitate inventories or even optimization of stock management:

-digitization of counting;

-Stock in real-time;

-centralization of data;

-collaborative systems, such as the VMI (Vendor Managed Inventory);

As Isabelle Badoc, Product Marketing Manager for Generix Group’s Supply Chain Execution solutions, points out, some companies have thus chosen to “set up an order preparation organization that is adapted to the flow of ‘greater finesse (more orders with fewer items per line) driven by transport plans ‘;

-Speed ​​up decision-making: as the situation changes rapidly, supply chain players must also be able to act much faster than in the past. The challenge? Adapt all facets of the activity to immediate reality, whether in terms of cash flow, labor or even investments, for example.

3 / A delay in digitization to catch up

The health crisis has considerably accelerated the digitization of practices. With the closure of physical points of sale, restrictions on travel, and fear of interactions, many end customers are turning more to e-commerce. The same goes for B2B buyers, who had already started adopting digital purchasing behavior for a few years. The urgency of digitization is moreover all the more significant as several digital B2B distribution platforms are developing exponentially, like Amazon Business and Alibaba, thus unbalancing the balance of power with distributors ” traditional.”

+ 15% This is the annual growth of B2B e-commerce in France over the past 3 years 1.

Faced with these new behaviors, the players in the supply chain have no other choice but to go digital on a forced march. To achieve this, several projects must also be prioritized.

Develop digital opportunities: in addition to the creation of digital media to meet the expectations of B2B and B2C customers (e-commerce platform, mobile application, etc.), it is also necessary to offer new services, which have become essential at the time of the health crisis (click and collect, knowledge of product availability in real-time, live delivery monitoring, etc.);

Provide “live” management: these different services are only possible if the company is able to manage its stocks and its activity in real-time. This requires in particular the centralization of all information (goods receipts, exits, orders, delivery, etc.) within a dedicated software, directly interfaced with business software, such as aWMS (Warehouse management system) or one TMS (Transport Management System).

-To reinforce customer support: adopting digital practices also requires rethinking its customer relationship. It is indeed necessary to transform the services in contact with customers (sales, after-sales service, etc.) in order to adapt their operation to the current situation while responding to the uncertainties arising from the health crisis. More than ever, the need for education and support must be obvious.

4 / A relocation requirement in Europe

The health crisis has finally shown the limits of ultra-globalization. In fact, current constraints have considerably complicated the exchange of international flows, whether in terms of regulation, supply or transport. It must be said that the health risk is all the greater with long-distance exchanges, the latter involving more players throughout the distribution chain. A situation far from trivial since the logistical risks are stronger than ever: shortage of products, inability to renegotiate contracts, dependence on suppliers, closure of borders, etc. The cost of transport for flows that have shifted to e-commerce has also increased. As Isabelle Badoc reminds us, “ shipments are generally made through couriers or expressions. Reduced to the article, the cost is, therefore, higher than in the case of a full truck charter ”.

To overcome these various constraints, the relocation of the supply chain, in France or at least in Europe, is therefore affirmed as a necessity. Although the site is colossal, different levers can be activated to move towards this ideal:

-determine the positions that can be relocated to France or Europe (suppliers, after-sales service, etc.);

-rely on sector synergies in order to limit the financial impact of relocation;

-request the support of the State in order to be accompanied in the relocation of the distribution chain.

1 2020 e-commerce key figures – e-commerce and distance selling federation – 2020

This article originally appeared on Republished with permission.