Covid 19 and the Simplification of Supply Chains

by Tim Richardson | Iter Insights

Covid 19 and the Simplification of Supply Chains

Covid 19 and the Simplification of Supply Chains featured image

Our previous articles about the impact of Covid 19 on supply chains have examined the immediate and longer-term impacts. Whilst much of what we projected has and is panning out, the one thing that has amazed us is the pace and focus of change that has been achieved. The example that stands out more than any other is the redesign of a CPAP machine in less than 100 hours and how the design was then made available for anyone to make.

In this article we are going to look at the simplification that we are seeing in many supply chains and, whether this is a positive trend for the future. During my thirty-year career in manufacturing and supply chain the trend has always been to create more complexity and sub-division of markets, with manufacturers looking for ever more closely defined niches to exploit, offering tailored products and/or services to the market. Accelerated by globalisation and the growth in routes to market there is now a generation of Integrated Supply Chain Planning Systems that supports each niche, or customer group with differential service to minimise physical complexity and minimise the cost to serve. It seemed a trend set to continue – until about six weeks ago.

Suddenly demand is outstripping supply in core markets, whether food, PPE or equipment supporting the fight against Covid 19 and the reaction has been to simplify what is offered and how it is offered. From my conversations with clients across multiple industries I have heard of many tales of complete lines being de-listed, product offerings simplified and a more direct and simple supply chain between manufacturer and end customer. In the short-term much of this will be expensive, as the prime objective is to maintain supply. However, as we emerge into the `new normal’ I wonder how much of this simplification will survive. After all, what we are looking at is the model used by Aldi and Lidl and look at the impact they have had on traditional food retailers.

 

Our strong view is that as well as great harm, a lot of good is emerging from the current crisis and that it would be wrong to not learn the lessons and value of simplification. The core to this will be to understand what your cost to serve was before Covid 19, what it is in these simpler times and what it could be with more control in whatever the new normal becomes. With this understanding you can decide where your supply chains need to remain simple and low cost and what the true value is of added complexity and sophistication.

Iter is expert in Cost to Serve modelling and supply chain transformation. Our experience of the segmentation of demand patterns will provide you with the robust analytic framework that will enable you to understand the lessons of Covid 19 and shape your future supply chain to confidently step into the `new normal’ in the months to come.

Tim Richardson
Development Director

Iter Consulting

Iter Insights

Welcome to Iter Insight, this is one of a monthly series of articles from Iter Consulting addressing the most critical operational and supply chain problems businesses face today.