Black Swans & Supply Chains: Steps to alleviate the pain

Whether you regard COVID-19 to be a Black Swan event or not, there is no doubt that the consequences to our supply chains have been catastrophic. Here are 5 steps to alleviate some of the supply chain pain linked to COVID-19.
Steven Freemantle | May 06, 2020

STEP ONE: Get control of your lead times (and reduce them)

In order to manage the wild swings in demand and supply, you’ll need to reduce the time to replenish stock, so that you can react quickly to fluctuating demand.  A good way to reduce lead times, aside from improved supplier arrangements, is to automate.  Be careful what you automate though, a level of predictability is needed for automation not to exacerbate the chaos.  Your transaction and master data will also need to be accurate.

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STEP 2: Ensure your stocking strategies reflect your new reality

In order to alleviate the pain caused by shortages in supply, you will need to revisit your stocking strategies, particularly of your critical inventory.  Once that’s done, be sure to update your MRP settings inside your SAP system to reflect your decisions. 

REMEMBER: Now that you’ve reduced your lead times, you can most likely keep less stock.

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STEP 3: Set up COVID, critical stock swim lanes

Group your materials into swim lanes, (or buckets or boxes) that allow you to easily find your COVID-19 critical SKUs inside your SAP system.  With this in place you’ll be able to use your standard reports for quick visibility of inventory performance and demand and supply imbalances for your vital inventory.

STEP 4: Check demand and supply balancing – every day

With accurate data and swim lanes in place, you'll need to introduce daily supply chain monitoring that encapsulates “The Three Rs”: Rhythm, Routine and Real-time processing.

  1. Rhythm: A set time of day, every day, when your supply chain staff connect to ensure today's work will be done today.
  2. Routine: The steps and structure you will follow to ensure adherence the rules.
  3. Real-time Processing: Ensuring you data always reflects your current reality.

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STEP 5: Performance manage your inventory

It is going to be difficult to rely on your history.  While you may have trusted your inventory levels before COVID-19, even if it was that there was more than enough, it may be challenging to get back to those levels any time soon. Inventory owners are going to need to keep careful track (at very least, weekly) on how inventory is performing.  The upside is that they may be able to avoid stock spiraling out of control again. 

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There's no doubt we're in for a challenging time.  Look into your SAP system to find the reports that will give you information to better navigate Black Swan Events. Most of these reports have been around since SAP R/3 days (and are still there). If you click through the related blogs in this article you'll get tips on where to find them.

 

Black Swan Event definition (Lexico): An unpredictable or unforeseen event, typically one with extreme consequences. 

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