Supply Chain Management in Wartime: Helpful Tips from an Expert
Supply Chain Management in Wartime: Helpful Tips from an Expert
Effective supply chain management has always played an extremely important role in the retail industry. After all, the quality of the built processes of this chain is essential for business success and directly affects the company's profit. However, the difficult tests of recent months have led to a violation of well-established mechanisms and are forcing the owners and managers of retail to adapt and look for new business methods.
What tools can be used to improve supply chain management in times of war, says Denis Romash, Head of Supply Chain Management Practice at Consulting for Retail.
Actual problems of supply chain management
In addition to severe social and economic hardships, the hostilities have caused significant disruption to supply chains and created a range of challenges and risks in the retail industry.
Among the difficulties faced by almost every retailer:
- changing demand and consumer preferences;
- shortage of goods;
- lack of personnel;
- the need to adjust the usual logistics routes;
- rising prices for fuel, consumables, and, as a result, an increase in the cost of logistics services;
- loss of retail outlets and warehouse space, including their physical destruction, and much more.
The rate of utilization of transport in logistics has decreased over several months from 90% to 20-30%.
All these factors lead to the narrowing of the role of the supply chain: from a vital mechanism that can provide a competitive advantage to the retailer, to the simple movement of goods from point A to point B.
Solving problems in supply chain management from the standpoint of the traditional Just in time approach has become impossible. The complication of the supply chain requires companies to quickly assess risks and immediately respond to failures, making more efficient and faster decisions, including with the help of modern technologies. Read on to learn more about how to improve supply chain agility.
Welcome to check your logistics business processes: download the checklist 'Warehouse Process Management: WVO' and see where and how improvements can be made.
Wartime Supply Chain Management: Setting Priorities
In an environment where the usual forecasts do not justify themselves and long-term planning has become almost impossible, we recommend that retailers pay attention to the following aspects.
1. Changing approaches to inventory management. You should move from long-term to short-term inventory planning. At the same time, it is necessary to change the structure of stocks, taking into account the likely increase in the logistical leverage, possible delays, and interruptions in deliveries.
Retailers need to take into account the fact that it will not always be possible to order the same product from the same brand. Therefore, it is worth thinking about the transition in management from SKU to ETU (commodity accounting unit).
2. Closer interaction with suppliers. Coordination of the volumes of products that the manufacturer can manufacture/supply, and the retailer can sell, helps to ensure the necessary level of efficiency, has a direct impact on the availability of the product on the shelf, and, ultimately, on the profit of the distribution network. At the same time, the features of transferable demand and cannibalization should be taken into account.
3. Decentralization of commodity flows. In the conditions of active destruction of warehouse and logistics facilities, companies with a high level of centralization were in the most vulnerable position. Therefore, the appropriate step would be to disperse inventory according to the speed of delivery, volumes of consumption, and potential risks of storage.
4. Changing the principles of insurance stock management. It is necessary to diversify and determine those goods for which insurance stocks should be created. To do this, it is necessary to regularly analyze the KVI of the basket, as well as the goods of group A. In this case, it is necessary to take into account changes in group A.
Overstock leads to additional costs along the entire chain: from purchase to maintenance and storage. Therefore, all decisions made should be based on balanced calculations.
5. Operational transportation management. Taking into account changes in logistics, the terms of delivery should be regularly reviewed both in terms of payments and in terms of volumes, terms, and capabilities of carriers. It is desirable to have several possible options for the delivery of the main groups of goods. Therefore, the retailer must:
- regularly clarify the conditions of transportation (Incoterms), which directly affect the total cost of transportation and the cost of production and, if necessary, find other carriers or make adjustments in cooperation with existing ones;
- use for forecasting tools that take into account the latest periods in sales, allowing you to make flexible forecasts of sales volumes and accordingly form orders, which will help free up working capital, which many companies currently lack.
6. Use of flexible automated transportation management systems (ACS). Modern solutions allow you to plan the route of cargo transportation based on the latest trends, for example, take into account the time required to visit charging stations, as well as roads where you can charge the battery on the go, etc.
The use of automated control systems makes it possible to more accurately plan transportation, rationally use transport and reduce the time it takes to complete the logistics chain.
7. Reliable protection against cyberattacks. Over 80% of companies have experienced a significant cybersecurity incident in the past two years, according to Gartner's research. And, as the events of recent months in Ukraine have shown, enterprises remain at risk of experiencing all the adverse consequences of hacker attacks. Therefore, business leaders must be prepared for a possible increase in the number of attacks and protect their information resources by using advanced cybersecurity services that can withstand various types of threats.
Comprehensive support from professionals
In a rapidly changing situation, full of risks and failures, any decisions should be based not only on experience and intuition but also on the use of mathematical methods that can increase the flexibility and resilience of the supply chain.
Building a mathematical model allows you to determine the optimal order volume, and carry out transportation planning taking into account their cost, possible delays, and other risks that may arise in a given situation. The compilation of a mathematical model should be preceded by an audit of the processes of operational management of supply chains.
As part of the project, C4R specialists:
- analyze processes and collect practically significant information for your business;
- compile a supply chain mathematical model and teach the nuances of working with it;
- provide tools for self-development of various supply chain scenarios and search for the optimal scenario for literally “next week”;
- will help you choose a reliable transportation management system, implement it and provide support at all stages.
The C4R team has successfully implemented 220+ projects of various sizes and has more than 20 solutions for the automation of retail processes, logistics, and distribution in its portfolio. The company's solutions enable retailers to proactively identify potential issues and collaborate more effectively and proactively with partners to prevent supply chain disruptions. If you have any questions - ask them to our consultants: write to [email protected] or fill out the form to order a callback.
The author of the article is Denis Romash,
Head of Supply Chain Practice at C4R
