The Need To Review Business Processes In a Changing Economy (4/7)
Serie: Covid-19, what happens next? How to prepare your business in 7 steps | Episode 4 / 7
Changes Following the Covid-19 Crisis
The reality we are currently experiencing brings with it a lot of disruptions and changes to our habits in our everyday life. Many of these trends may continue once the pandemic is over and supply chain processes will need to adapt to this new reality.
Changes in supply chain, remote working and e-commerce are strong responses to the epidemic and help cope with the sharp economic downturn. The changes happening at an individual level will be rapidly reflected within manufacturing companies.
Increase in Online Purchasing
For several years now, online shopping has been part of our daily lives. The current situation has only increased and confirmed this trend. Many small business owners have moved their operations online during this pandemic and some will choose to continue this trend long after the pandemic has passed. This will allow them to operate at lower costs with savings on rent and unnecessary overhead.
The impact of reduced rent and overhead often results in the procurement of smaller lots. A company that relies on a network of wholesalers and distributors to ensure delivery of its products generally ships orders in large volumes. For these types of organizations, moving to a mode of delivering directly to customers will be a new challenge. Not to mention the headaches of managing product returns and refunds. These companies will need to have robust processes in place to meet these kinds of requirements.
In today's distribution networks, each shipment may represent a number of pallets, transported by a full-load trucking service. The new context of delivery to the consumer will be very different. We are talking about small orders of a few units, delivered to the consumer via a parcel delivery service.
There will be a need for increased flexibility in the preparation for orders of all sizes. This translates, for example, into grouped shipping from the warehouses of several orders to minimize handling effort and delays. Such situations will have an impact on the processes and work methods needed to execute efficiently.
The Impact of Increased Online Purchasing on Business Processes
In this new approach, the company will have to reinvent its warehouse operating methods. Therefore, the situation where a handler prepares one order at a time will certainly be resolved. The future process will have to provide, among other things, that several small orders will be picked at the same time in order to minimize the number of trips in the warehouse.
In addition, this new approach will generate additional requirements to replenish picking area from overstock locations. The new process will have to provide the appropriate communication to ensure continuous availability of merchandise to be ordered resulting in better operational efficiency.
Another area impacting online shopping will be in transportation planning. The new process will have to consider a mode of communication with carriers where full loads will be replaces with parcel deliveries.
Technology is an Ally When Reviewing Business Processes
To support this new method, the company will have to rely on cutting-edge technologies: creating automated processing of online orders and creating systems for warehouse operations. In some cases, it will be necessary to modernize specific assets. For example, handling and storage equipment will need to adapt to new operating procedures in order to achieve targeted productivity and minimize the risk of errors. In some cases, forklifts will be replaced by order pickers and better equipment for this type of operation. On the other hand, to reduce the risk of errors, a Warehouse Management System (WMS) could become a must, assisting the precision of each item being assigned to the appropriate order, in the same round of picking.
Human Resource Changes
The contribution of human resources should not be neglected. We must ensure that employees receive the appropriate training on revised work methods and the use of new technologies, especially those who have been operating without technology. In some cases, a forklift operator will see his role transformed and will now act as a handler assigned to the preparation of small orders. The involvement of key people will therefore become essential in reviewing the processes impacted by the changes. There will be an accelerated need to adapt and transition to the new operating process.
Changing Procurement Processes
The shortage that we have recently observed, both in terms of food and medicine is leading consumers and businesses to review their supply sources. Whether for environmental, customer service or risk management reasons, some will turn to local vendors even if this will generate additional costs and reduce profit margins.
Total Cost of Ownership (TCO) becomes a key element during this process. Organizations will be willing to buy locally if the costs involved are in line with their business model and their customers’ ability to pay. Such analyses will allow organizations to compare various supply sources and make an informed decision on which one to choose.
Shifting To Local Suppliers
Certain risk analyses that could previously have been overlooked will become important. In order to be able to compile the cost and risk elements related from one supply source to another, the procurement process will have to be reviewed step by step to identify opportunities for improvement.
On the other hand, local suppliers will generally offer shorter lead times, which will be a significant benefit for inventory levels. Obviously, such a change in purchasing behavior for some will lead to a shift in demand for others. It will then be essential to be able to capture and deal with any demand disruptions.
In this case, it is the inventory management processes that will need to be reviewed. The methods for assessing demand and calculating buying parameters may be poorly adapted to new and changing processes, where flexibility and speed of readjustment will become key elements in the competitiveness of organizations.
The Need for Technological Solutions
To deal with these process changes, it will require an immediate need for technology to capture real-time data and business insights. These technologies will make it possible to study the characteristics of changing demand and adapt quickly. The key to the success of some businesses may depend on their ability to respond in the shortest possible time to the changing requirements of their customers.
Making the Most of Your Workforce
Since a human element is a major factor in the implementation of revised processes, it will be essential that the people involved in procurement planning and demand management be competent in the best business practices applicable to their organization. Training in demand, operations and inventory planning will become important. Demand and supply management stakeholders will also have to be involved in the review of the process concerns, making changes easier.
Moving From B2B to B2C
In short, with online purchasing and the increased proximity of suppliers, it is likely that some companies will move from a predominantly B2B (Business-to-Business) to a B2C (Business-to-Customer) business. Such a change in structure will often imply the establishment of a renewed operational and technological vision as well as the re-engineering of several impacted processes. Once again, adaptability and operational flexibility will be a determining factor for many companies.
The Covid-19 crisis accelerated changes that were already underway. There is no doubt that some sectors are facing significant long-term challenges due to closures, distancing measures, and new consumer behaviors. At the same time, there will be sectors that will strengthen and reinvent themselves to recover from this difficult period. So, we should not underestimate the ability of people and their businesses to recover from these difficult times.
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