Businesses are also weighing up the need to give consumers choice and customisation against the ability to reduce the number of product lines and stock keeping unit codes (SKUs) in order to reduce overall complexity in the supply chain. We have seen in the context of the pandemic that reducing SKUs has enabled some businesses to survive and be more resilient and more efficient.
Global supply chains were popular before the pandemic but companies are now considering moving to more local supply chain and labour to improve business continuity. Buying local can be of significant benefit to supply chains in avoiding disruption from external events such as coronavirus or Brexit. There are still some practical limitations here because not every product can be made in every location. Plant based products, for example, are climate specific.
Production methods and stock
Lean and agile manufacturing has been made possible by technlogy and data. However, just in time models have little resilience or tolerance. Businesses which are now prioritising resilience are investigating the use of stockpiling to provide a buffer in case of manufacturing disruption. They are also looking at other production models such as materials requirements planning, flexible manufacturing systems or more fundamental changes such as modular or on-site production. Businesses should consider carefully the best production method and stock holding which balances cash requirements with resilience.
Supply chain consolidation
Consolidation of the supply chain brings with it reduced risk and volatility as focus is placed on fewer suppliers which reduces the risk of integration and the inherent risk of poor management of a large number of suppliers. The improved predictability and transparency can result in better compliance and improved relationships which help with resilience. We are also seeing a surge in kingmakers. Kingmakers create value in the supply chain by creating an alliance of supply chain partners to work collaboratively. This could be the OEM, 3PL provider or another party in the supply chain and different models are emerging across Europe.
Fundamentally the current situation provides the drivers for business change at this time. Whether that is aligning to the above trends, increased collaboration, circular economy or increased use of data and technology. To support businesses in rebuilding their supply chains we have created a checklist of some of the key issues to consider and factor into the strategy below.