How to run a lean and flexible supply chain

Posted by Barloworld Automotive & Logisitics on 29 Apr 2020 4:17:26 PM

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With the recent Moodys’ downgrade to junk status as well as the national lockdown due to the COVID-19 pandemic, businesses will need to optimise their supply chains to increase efficiency and profitability if they hope to beat a recession. Here’s a few insights from our team of experts to help you identify where to start.

There’s no denying that 2020 is off to a rough start for both businesses and individuals in South Africa. As we head from stage 5 (full lockdown) to stage 4 lockdown (slight relaxation of regulations) in May, we’ll see more businesses resuming operations - but still the need to adhere to strict health and safety regulations and social distancing. Interprovincial and international travel will remain banned, with the exception of moving essential goods and special circumstances outlined by the government

With tough economic times ahead, South Africans will have less disposable income due to salary cuts and increased unemployment. This means that businesses will need to adapt their offerings, as priority will be placed on essential items over luxury goods and travel. The next few months will be challenging as we adjust our lives and the economy to our “new normal”. 

Now, more than ever before, supply chain optimisation should be prioritised if organisations hope to survive an economic downturn due to these recent events.

Establishing a lean and flexible supply chain in your business

Establishing a lean and flexible supply chain is one of the best ways to help your business not only save costs, but improve service levels for greater customer retention. So, where do you start? We’ve identified a few areas in your supply chain where you can implement small changes for maximum impact. 

Learn how Illovo SA improved service levels to over 99.9% | Download case study


Where to begin optimising your supply chain

Optimising your supply chain starts with having full visibility of your operations. In order to gain such visibility, you’ll need two key elements: access to the right data and having the ability to extract proper value from this data. 

Technology to invest in to future-proof your business

Make sure you have a control tower for complete visibility in your supply chain

Data is key to deciding who survives and who doesn’t during a recession. To be agile, businesses need real-time access to information at their fingertips 24/7 via a centralised control tower. With a control tower in place, you’ll be able to see exactly where stock is in your supply chain and analyse trends and opportunities. This way you can respond rapidly to market changes. 

A control tower will also allow you to improve the customer experience, with a semi-self service model using a customer portal to track the progress of orders. This is especially helpful if you plan to enter the ecommerce environment. 

Supply chain companies need to invest in a standardised platform which integrates easily with clients’ core software systems. This needs to be a simple, standardised, cloud or app based platform that gives instant visibility and doesn’t need developers to write lengthy, custom coded integrations. 

Leverage predictive technology and artificial intelligence

Using technology you can plan strategically to eliminate waste within your supply chain. For example, stock arriving at the Durban harbour and being shipped to the Johannesburg warehouse to be picked, packed and sent back down to various branches in KwaZulu-Natal will incur unnecessary costs. However, technology can assist in rerouting orders in the most efficient way.

With predictive technology and artificial intelligence (AI), customers can enjoy safe and on-time delivery. At the same time, companies are enabled to identify the most suitable routes, improve warehouse management, and reduce inventory errors.

Read our article, Predictive technology: paving the way for unique customer experiences, to learn more.

Invest in a solid eCommerce platform and strategy

Now is the time to invest in rapid digitisation. With experts predicting that social distancing is here to stay (at least for the foreseeable future), businesses need to start looking at how they can take their operations online. 

It is a good idea to move into the eCommerce space as quickly as possible (especially those supplying non-essential consumer goods). This will ensure business continuity, despite restrictions around gathering in public spaces such as shopping malls. 

Source locally wherever possible

Not only will sourcing goods and raw materials locally mitigate the risks and high costs involved when relying on imports, but you will also be helping South African businesses stay alive and create more jobs. Sourcing locally will play a big role in helping the economy bounce back. 

Reduce stock holdings in your warehouse to between 8 to 10 days worth of inventory

With the rapid changes of the COVID-19 situation, it’s difficult to plan too far in advance as no one knows where the future is headed. Reducing your stock holdings will help reduce capital expenditure and allow you to be more flexible if there is a change in buyer behaviour. 

Outsource specialised activities where possible

Outsourcing activities like fleet management, supply chain management and logistics frees up your time to focus on your core business - while your suppliers use their expertise to optimise your processes, increase efficiency and save costs. 

The benefits of outsourcing your supply chain management and logistics

The biggest benefit of outsourcing your supply chain management and logistics, is that we negotiate for the best rates on your behalf. An individual company would not be able to negotiate for a rate as low as that of a 3PL or 4PL provider simply due to shipment volumes. We have networks with thousands of carriers and can strategically combine customers’ loads to increase volumes and subsequently decrease costs.

The second important benefit of outsourcing to a 3PL or 4PL provider is that you’ll be able to access a greater pool of skills and technology on demand. This means that you can scale your efforts up and down depending on your needs. You’ll also have access to technology that would, under normal circumstances, be inaccessible based on price - such as being able to utilise things like block chain and simulation modelling. 

How will COVID-19 affect South African businesses in both the short and long-term?

The combined effect of the COVID-19 pandemic, the declaration of a national state of emergency and lockdown, as well as the Moodys’ downgrade to junk status earlier this year is yet to be fully understood. There is no crystal ball or case study that can help anyone accurately predict what a post-COVID-19 world will look like.  

South African woman working as an essential worker in a warehouse wearing a mask and gloves due to COVID-19

Caption: Barloworld essential worker wearing a mask and gloves for protection in a warehouse.

As a nation, we have a long road ahead of us. We predict that these events will completely change the face of business as we once knew it - with social distancing, rapid digital transformation and remote working becoming part of our everyday lives. 

In summary

In uncertain times, maximising your cash flow and focusing on improving service levels to increase customer retention will help your business gain a competitive advantage.

While labour is often the first place to reduce costs, these decisions are often made by managers alone. A strategic partner will assist you with making data-based decisions to deploy the right skills in the right places throughout your supply chain. Effectively mapping out processes to improve efficiency and increase productivity is critical if your business hopes to retain staff and maintain customer service levels. 

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Topics: Trends, Supply Chain Management

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