The spread of the new coronavirus, COVID-19, is being felt globally across operations in ways that are difficult to model and assess. Could COVID-19 be the black swan event that finally forces many businesses, and industries, to rethink and transform their global supply chain model? One fact is beyond doubt: It has already exposed the vulnerabilities of many businesses, especially those who have a high dependence on China to fulfill their need for raw materials or finished products.
China’s dominant role as the “world’s factory” means that any major disruption in China puts global supply chains at risk. Companies whose supply chain is reliant on level 1 (direct) or level 2 (secondary) suppliers in China have experienced significant disruption.
The Chemical Division of UFlex manufactures world-class quality inks, adhesives, specialty coatings and polyols used by converting industry. This business occupies leadership position in solvent-based, solvent-free and water-based adhesives, PU Ink Binders, Flexo & Gravure Inks.
Supply chain is one of the critical function of the business which works on simple philosophy of “Customer Focus, Efficient and Green Supply Chain which manage scale with Agility”
We at UFLEX Chemical Division, worked closely with key suppliers to understand how they are managing through disruptions to their supply chains, it helped our businesses to proactively align towards the best possible available options. Also, we worked through alternative sourcing strategies.
At this point, I must mention that a robust risk mitigation plan deployed three years ago, had already helped us identify the risks and deploy risk mitigation plans proactively. This minimized the supply disruption during COVID. By virtue of being part of essential services, we restarted our operations with a very brief stop which meant identifying quick ways to restart our operations and manage disruptions during the beginning of the lockdown. At this stage, it was critical to identify alternative supply scenarios and evaluate, what these mean for our operations — for example, as cases of viral transmission emerge in different territories globally.
Supply Chain at UFLEX consists of the following functions:
- Production Planning Control
- Logistics &
As the COVID-19 threat spread, here are measures UFLEX, Chemical Business took to protect our supply chain operations:
Short Term/Immediate Actions in Supply Chain:
- Performed a short to mid-term operational risk assessment on critical business functions;
- Quantified ‘COVID-19’ impact in terms of supply and demand disruptions, both today and longer-term and future market performance;
- Conducted scenario planning exercises to understand the operational implications — financial and non-financial;
- Closely worked with key supply chain stakeholders on immediate assured supply volume and estimated changes to demand for the next few quarters;
- Updated inventory policy and planning parameters;
- Prepared for very short plants’ closure;
- Focus on production scheduling agility;
- Worked closely with sales team to understand the demand impact;
- Worked out short-term demand-supply synchronization strategy.
- Focussed on effective communication with vendors to obtain real-time status;
- Accessed critical supply chain data across all tiers to properly assess the potential damage;
- Activated pre-approved raw-material substitutions in places where the primary supplier was impacted but a secondary supplier was not;
- Activated product redesign/changed product formulation through R&D, where reliable second sources of raw material were not already available;
- Secured capacity and delivery status for Tier-2 and Tier-3 suppliers, and secured allocated supplies, where possible;
- Buying ahead to procure inventory and raw material that is in short supply in impacted areas;
- Minimized the drain of working capital.
- Updated customers about delays and adjusting customer allocations to optimize profits on near-term revenue or to meet contractual terms;
- Worked closely with District Administration to ensure smooth movement of inbound & outbound trucks;
- Illuminated the extended supply network by effectively collaborating with our third-party logistics service providers to obtain permission for operation during lockdown & ensure supplies to our customers;
- Evaluated alternative inbound logistics options & enhanced inbound materials visibility;
- Evaluated alternative outbound logistics options and secured capacity;
- Prepared for potential channel shifts;
- Open channels of communication with key customers;
- Prepared for the rebound.
We quantified and communicated what we viewed as supply-and-demand volume changes, to our baseline forecasts for the next few months.
Looking ahead: the imperative for a new supply chain model
A decades-long focus on supply chain optimization to minimize costs, reduce inventories, and drive up asset utilization has removed buffers and flexibility to absorb disruptions.
Focus areas for the future:
1. Improve supply chain visibility
Deploy supply chain visibility tools that provide a line of sight to capacity constraints into first-, second- and third-tier suppliers. By going further into their supply chains, global manufacturers can get a more complete profile of where raw materials are coming from.
2. Model new risks and costs
Business leaders should also look at how new tools and technologies can provide greater intelligence. For example, risk evaluation tools that make use of machine learning can find patterns that can indicate risks or opportunities in macroeconomic, geopolitical and global health, exchange rate, and other data.
3. Focus on resilience
Supply Chain resiliency starts with organizations evaluating how they can proactively turn unanticipated into envisioned. With learning from the outbreak, the competitive forefront of supply chain operations will likely move toward more comprehensive proactive modeling. A resilient supply chain balances risk and costs to prevent or recover quickly from a multitude of dynamic and simultaneous risk-related disruptions.
Trends of supply chain are accelerated towards greater integration of demand and supply management, close coordination with stakeholders and risk mitigation plan. This is being driven by the need to respond quickly to the supply chain disruption and requirements of the year 2020 and thereon.
Black Swan events like COVID are new normal and key to success for supply chain professionals is to think & plan ahead of these potential disruptions. Basics need to be reviewed & refreshed, periodic review of risk mitigation plan, engagement of tier I & II suppliers, inventory norms should be well defined and supply chain needs to be agile to respond to changing environment.
When I look back last couple of months, it gives me confidence that continuous investment we did on resources & systems enabled us in responding to the adverse situation effectively. We successfully served our customers in line with their expectations. Rather our reliability quotient with our customers has gone up by multiple points.