When a Black Swan hits, having the right advanced analytics to react to supply chain disruptions is your company's best defense.
Food & beverage (F&B) supply chain disruptions are many and varied: volatile commodity prices; safety and quality issues; high demand uncertainty and seasonality; constant promotional activity; perishability; frequent new product and brand extension introductions; exacting distribution requirements; complex manufacturing constraints; legal and regulatory restrictions, and fickle consumer tastes.
In fact, here’s an excellent post listing the challenges and the foundational elements - people, process and technology - needed to build a strong and resilient supply chain in F&B. Drilling down, you’ll learn that demand planning, inventory, replenishment, manufacturing and S&OP capabilities are the building blocks of supply chain planning excellence.
In the context of more normal times, we might use this space to talk about the planning and operational improvements available to F&B companies if they implement pre-built analytics solutions to manage, for example:
But these aren’t normal times. So let’s change the game, the tone, the degree of urgency. Enter COVID-19, the Black Swan of 2020 - an event that is rare, highly impactful and, in hindsight, believed to be predictable.
Imagine the following scenario: your boss arrives in your office and instead of saying, “Hey, let’s put advanced analytics on the supply chain improvement strategic roadmap,” she says, “The Board just met to talk about near-term steps we should take in response to the pandemic. Where can we see meaningful results in the next five business days?”
Where would you start?
First, you have to assess your organization’s strengths and weaknesses. If your business has yet to embrace advanced analytics for food & beverage as a component of superior people, process and solutions, there is a silver lining. It will never be easier to convince company leaders that a resilient supply chain is critical. Begin by creating an advanced analytics roadmap. In short, don't waste a good crisis. Here are five ways to get you started.
If your company has an advanced analytics practice in place, let the exploration begin. Comprehensive and configurable dashboards will help you see the potential for positive change across your entire supply chain. Remember, you have five days to make a meaningful impact. Here are some suggestions to help focus your analysis.
1. First, know how your supply chain data influences your company’s financial performance. For example, if you know which suppliers are cash-constrained, you may have an opportunity to alter the discounting structure in your favor.
2. Second - and this one is cultural - it’s a good time to tell analysts that for now there are no bad ideas. That said, your guidance should make it clear that reallocation of existing resources is preferred to numerous what-if exercises and lengthy trials, and that now is not the time to be developing new analytical capabilities.
3. Speaking of reallocation, consider what it means for your business as retail food demand reaches unprecedented levels and spot shortages occur. People aren't necessarily eating more food; they're just eating it at home. Think about modeling the impact of diverting some products from certain vendors to others. Under the overarching goal of increasing consumer touch-points, food destined for corporate and university cafeterias, cruise lines, airlines and restaurants could instead be sent to grocery stores, retailers and even direct-to-consumer. Maybe it’s time to revisit and revitalize the 10 least meaningful outlets in your current supply chain. Whatever the case, make sure you close the loop on the modeling exercise by looking at what happens, for example, as restaurants re-open with limited but gradually increasing capacity and demand signals begin to return to normal.
4. We are all familiar with the fact that consumers are focusing on the basics like bread, eggs, flour and toilet paper. It could be a perfect time to simplify your packaging and finally reduce SKUs, resulting in fewer set-ups. Some bakers have reported that they were making 14 varieties of bread a month ago, and now they are making three. And since aspiring at-home bread makers seem to be forgetting to buy yeast with all that flour, you might be able to exploit some interesting bundling and promotional opportunities.
5. Finally, while companies have to be careful about dramatically increasing production, it could be interesting to examine the effect of a pivot. Advanced analytics and an AI-powered digital twin help you do this. We’ve all read about breweries and distilleries retooling to produce hand sanitizer and other F&B companies helping their customers shift from a dine-in to a take-out model.
Remember that all of you F&B supply chain planners have a distinct advantage: you’ve never known 'normal'. Creativity, flexibility and resiliency are your normal. So get started.