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6 Supply Chain Actions To Reduce The Pandemic Impact

As supply chain companies shift gears to accommodate the worldwide challenges of the pandemic, one of the most affected areas is turning out to be the shift from normal delivery patterns to an increase in residential deliveries. While each company is different, the increase in the daily volume has risen around 8% to 10% on average over last year.

For instance, UPS has increased 8.5% in the first quarter. This shift is affecting many aspects of a company, but profitability is strongly impacted from the shift in volume from commercial to residential deliveries. This will undoubtedly initiate price increases if the current situation continues.

It is becoming apparent that this mega trend shift to a more robust remote workforce is part of the new normal. Home orders are much more commonplace now and for some companies the levels are approaching 60% to 70%. The shift has been quick and unprecedented, continuing to leave many companies in the supply chain and freight carrier market segments struggling to deal with it effectively.

This will likely cause lower cost effectiveness for each delivery because the shipments are smaller and take more time, and in addition deliveries are more spread out. Miles driven and the number of stops necessary to maintain customer responsiveness are significantly impacted, decreasing revenue due to these factors.

In addition to these influencers, the change in regulations and security concerns add more cost increases to the process. Containers are taking longer in customs for international shipments, and an increase in container examinations and demurrage add to delays and costs.

All of these have a direct effect on internal operations as well. Demands on freight capacity are significantly increasing caused by delays, capacity factors, and the delivery regions affected by the pandemic. Demand also appears to be increasing in variability and uncertainty almost daily, as news updates are released.

Strain On Internal Operations

The pressure of the new economic reality doesn’t stop there. While external pressures are affecting the way supply chain companies are responding, those factors also influence the way they must now operate internally. Several specific areas are feeling the impact on the work forces, some of it due to the volatility and much due to the strain on the resources. For instance, during the pandemic, we have spoken to the CFOs and COOs of several of our clients to get their take on the situation from their viewpoint.

Some of the key points they are making about how they are being affected include:

Strong Ripple Effects on supply chain ERP systems

The concept of a supply chain is that every link is connected to another link(s), and it is true that the afore mentioned challenges are also affecting their ERP systems, which support the business unit it a technological way. As we’ll see in the next section, there are things that can be done to improve the circumstances and disruption on the internal systems

Below are some of the issues that are cropping up as companies try to compete and meet market demand needs:

Higher volume of traffic to meet demand:

Strains on internet provider resources:

Increased threats of ransomware vulnerability:

Manufacturing production planning disruption and decreased efficiency

6 Actions that can be taken to reduce risk and improve profitability

There are many choices and actions that can be taken to counteract these challenges and threats and maintain or improve profitability during the pandemic. These changes will also likely provide stronger competitive advantages in the aftermath of the pandemic threat and may even increase market share. Not all competitors will recognize the opportunities, and many that do may not be in a position to take advantage, just doing what it takes just survive.

This presents an opening for supply chain businesses to further penetrate their markets and improve profitability. Not every company will consider taking all of these actions, choosing those that will have the greatest return on investment. But no matter how they proceed, the right tools will be needed to pull through these times and arrive in a better position when the threat has subsided. Seven actions are:

Increase system transaction volume bandwidth (see Acumatica’s ERP Evaluation Process here)

Provide efficient remote access for remote workers:

Increase Security:

Improve automation and team communications:

Invest in smart inventory management tools:

Invest in state-of-the-art shipping tools:

In summary:

As the effects of the pandemic firmly entrench themselves in the current business environment, one thing stands out above all else — it is now paramount, or will be soon, that any company seeking to retain or improve market share, competitive edges, operating efficiency, and healthy profit margins will need to improve their infrastructure and business processes.

While this does not mean that companies on legacy systems can’t improve or even thrive while staying on their systems, in my opinion the evidence strongly suggests that upgrade and migration to cloud ERP solutions and the capabilities realized by doing so is by far the best path to undertake. While the advantages are too numerous to mention in one article, it is easy to see that making the move will be a substantial improvement for the vast majority of companies that are up to the challenge.

For more information on how Cortekx can help, please reach out to us to further the discussion explore ideas together. This is a great time to consider the options available to your supply chain and manufacturing company.

Originally published at https://www.cortekx.com on February 5, 2021.