How Companies are Handling Supply Chain Risks?

 Digital Transformation is Inevitable

All sectors and companies are adjusting their strategies to change with changing customer patterns with small movements and supply interruptions. Brands and sellers are transferring their practises through digitalization. Coronavirus has forced businesses to streamline their online operations, but many businesses have already adapted to it. Live-chat or end-to - end process automation were some of them. New processes are evolving overnight and the focus is shifting to try new technologies to speed up the digital transformation. disruptions.

This is pushing us to ask: Has COVID-19 accelerated digital transformation?

 FMCG item sales are growing rapidly

Due to the demand caused by panicked clients, sales of FMCG products are rising rapidly. During this pandemic, customers want to store vital goods and commodities. The current uncertainty surrounding the pandemic is contributing to an increase in consumer spending on critical commodities. Governments also relaxed the development rules for critical goods in many countries, allowing for quicker clearance with sufficient insurance coverage to sustain business disruptions.

 Will sellers be able to meet this surging demand?

 Definitely! All you need to do is plan your inventory and stock based on your business model and customer needs. The key to sustaining the current situation is to track the data trends over a period.

Key Takeaways for Brands

Track your inventory levels

No matter how hard you try, whether you are selling an important item or a non-essential item, there are high chances that demand will outpace supply. The extent of your inventory levels needs to be identified. This will help you prepare your inventory levels to monitor your outages. If the stock levels are limited, come up with inventive ways to capture demand.

Handle Sponsored ads in a smart way

For high volume search terms, particularly for your brand keywords, Amazon supported ads allow you to rank better. As Amazon ads are doing well during this period, this is the time to raise your ad budget. To satisfy the orders, however, you need to have enough inventory. Also, make sure you track your spending on ads and ensure that the sum remains within your budget.

Make the best use of your sponsored advertising during the time of uncertainty. You need to be smart and careful while running promotions and advertisements during times of huge demand. There are chances that your product may go out of stock.

 How sellers are responding to the pandemic?

We know that, on a large scale, this situation triggers panic among sellers. Though few sellers are concerned about the effects of COVID-19, their supply chain and sales will be crippled. While some think the effect is fleeting and much-hyped. On the other hand, there are few opportunistic sellers who explore and revamp their current portfolio with new product concepts. While the answers are mixed, the solution will be to understand the company's nature and remain connected with your business.

Supply Chain Risk Management (SCRM)

Hello Everyone,

This is Vembu Raj T, pursuing my MBA second year in Amrita School of Business, Coimbatore. Today’s my blog is on topic “Supply chain risk management (SCRM)”. Supply chain risk management (SCRM) is the process of taking strategic steps to identify, assess and mitigate the risk in your end-to-end supply chain.  

Supply chain risks include cost instability, supply shortages, financial difficulties and failures of manufacturers, and natural and manmade disasters. SCRM techniques and technologies allow an enterprise as efficiently and effectively as possible to anticipate future challenges and respond to both such threats and unforeseeable supply chain disruptions.

A comprehensive approach to SCRM includes the management of all forms of risk, for all levels of supply and for all project risks (suppliers, locations, ports and much more). When implemented right, SCRM is a vital enabler that is incorporated and integrated into the core processes of an organization.

Below are the suggested best practices for supply chain risk management:

1. To gather, evaluate and manage supplier information, automate processes involved in supplier risk management (SRM).
2. For insight into future financial challenges, include supplier performance information in your study.
3. Identify red flags that can signify problems and automate their early detection using technology.
4. Integrate SCRM platforms with information systems for procurement and supply chain management (SCM), including spending visibility information, e-sourcing, purchase-to-pay, contract management and enforcement.
5. Provide dashboards that can track and report on risk indicators of supply to provide the executive team access to risk factors in real-time observations.

Importance for Supply Chain Risk Management (SCRM) is continuously increasing over the time because of,

1. Just in Production/Just in sequence - Running a lean supply chain means you have less wiggle room when things go wrong.
2. Globalization - Outsourcing and supply chain length and complexity are growing. This leaves you open to more risk.
3. Brand Reputation - It is important to tackle problems that could damage the brand reputation with more regulation and the rising impact of social media.

 

#Lessonsfromthebest : Nokia vs. Ericsson

 Author’s Note: Over the last 5 weeks, I have been using this space to write about the lessons I learn from organizations with respect to their supply chain management, but not limited to it. I have also been attempting to convey my learnings as a narrative, and a story of sorts. So, if you want to learn something informative whilst having some entertainment, go ahead and read away! Also, if interested, make sure you catch-up on my remaining blogposts as well. Click here! 😊

Shanmugeshwari, MBA '21

Amrita School of Business, Coimbatore

 

 

MANAGING RISKS IN THE SUPPLY CHAIN

When a lightning struck a high-volt electric line in Albuquerque in New Mexico, a fire broke out in a fabrication line of the Royal Philips Electronics radio frequency chip manufacturing plant. Though the plant personnel quickly extinguished the fire in 10 minutes, this incident changed the mobile phone industry forever!

How?

At first, it was evident that only eight trays of silicon wafers were destroyed. A minor setback, sure. These wafers had they been fully processed, would have become the chips in thousands of mobile phones. But when dug deeper, this looked even worse! The fire, the smoke, and the water from the sprinklers contaminated millions of chips that had been stored for shipping. Now, this is a calamity.

A Look Inside: Semiconductor manufacturing plants are usually cleaner than hospitals

When the Philips engineers and managers were grappling with this issue, they realized that the clean-up would take at least a week. They decided to prioritize Nokia and its arch-rival, Ericsson, who accounted for 40% of the plant’s shipments once their facility was up and running.

Four thousand miles away, at a Nokia plant outside Helsinki, failed to get a routine input from Philips. The failure could well have been an anomaly. Nevertheless, the personnel informed the plant’s purchasing manager. A few hundred miles away, Ericsson also received a similar call from Philips. But since they hadn’t sensed any discrepancy in Philips’ performance until then, they did not perceive a need for concern or stepped-up action.

Over time, Nokia lost confidence that its partner had the problem under control. They moved towards adopting the response routines they had developed for such eventualities. Exactly two weeks after the fire, Philips admitted it would need more time to fix the problem; ultimately, the plant remained out of action for six weeks.

Recognizing that the problem with Philips could affect the production of several million mobile phones, Nokia took three pro-active steps:

• One team of executives and engineers focused on Philips, seeking a major role in developing alternative plans, it pressed Nokia’s case with Philips executives. By reorganizing its plans in its factories even as far as Shanghai, Philips responded.
• A second cross-continental team redesigned some chips so that they could be produced in other Philips and non-Philips plants. It consulted with Philips, where appropriate, to assess the potential effect of its decisions.
• A third group worked to find alternative manufacturers to reduce pressure on Philips. Two current suppliers responded within five days.

At the end of March, Ericsson finally started to appreciate the gravity of their issue. However, for reasons about which one can only speculate, it still did not act speedily. By then Ericsson had very few options left.

Nokia’s initial sensing of the problem and its rapid and effective response carried the day. Its profits rose 42 percent in the third quarter of 2000 as it expanded its share of the global market to 30%. The fire was not even mentioned in its quarterly statements and annual report for the year 2000.

On the other hand, six months later, Ericsson reported divisional annual losses of $1.68 billion, a 3% loss of market share, and corporate operating losses of $167 million. It also announced the outsourcing of cell phone manufacturing to Flextronics and the elimination of several thousand jobs; Flextronics took over Ericsson in October 2001. Ericsson's woes extended beyond cell phones and persisted in the years that followed. It finally returned to health in 2004, but as a much smaller company. The face of the mobile phone industry had changed forever, all due to a fire contained within ten minutes.

So, what do we learn from here?

Regaining the whole global production capacity after COVID-19 will not be a short process. It is highly likely that supply chain shortages will exist for a long time afterward. It is also likely that some parts of the supply chain will be more affected than others. Rather than looking for alternate vendors to deliver the parts or components that one needs, innovative companies can look at their products to identify whether they can be re-engineered to use the available supplies.