I like numbers.
Working with a spreadsheet and gaining an understanding of the patterns is cathartic for me. I also like to build infographics.
I joined Statista in my effort to train myself to build compelling infographics. I like their stuff. Here I am going to use some of their work to tell a story of what I think supply chain leaders need to do in this COVID-19 world.
COVID-19 introduces uncertainity and variability into the supply chain. Unlike other risk management events, there is no new normal. Instead, the supply chain leader is left to ride wave after wave of disruption. Supply chain processes are inside-out not outside-in. As a result, most supply chain leaders are riding the waves through brute force. Here, in this blog, I use the Statistica infographics to share three insights to help leaders in this unpredictable time.
In the United States, we are so tied up with the twenty-four-hour news cycle centered on the election and the rise of hospitalization, that I think that we are missing the impact of shifts in global demand due to COVID-19. In Figure 1, I share the Statista tracking of COVID-19 cases by country. While many might fixate on the size of the impact on the United States, what is important to me in this chart is the conspicuous absence of China, North Korea, and Japan. While Asian markets are struggling with the shifts in demand in Europe and North America, they have relative stability in their home markets.
The lingering impact of the costs of healthcare of COVID and the decimation state/local government budgets for testing/contact tracing lay before us. The black cloud of the cost impact hangs large over the countries with the highest infection rate that is absent in Asia.
So what does this mean for you? Businesses cannot succeed when society is failing. Next year, the giving supply chain increases in importance. Fallout and failure are inevitable. In short, supply chain models need to be outside-in and regional with clear corporate governance. We need to sense shifts in the market, and design processes to decrease data latency and minimize waste. In parallel, we need to take care of our suppliers through supplier development programs. Work on being a good trading partner. Now is not the time to elongate payables.
Shifts in Demand
As more and more families stay home, there is an unprecedented demand for products and a declining need for services. This radical shift, which changes over time, shifts demand. The impact is pervasive. History is a poor guide.
In this critical time, food products for the home rise and restaurant sales decline, home cleaning supplies increase and commercial janitorial products slow, elective surgeries delayed and emergency supplies expedited. The decline in service spending will redefine the dollar conscious retailer.
Consider this impact in light of the statistics of the fundamental shift in the market over the last seventy-five years. At the conclusion of World War II, at which time service industries accounted for 10% of nonfarm employment, compared with 38% for manufacturing. Since the 1970s the American economy has moved away from producing goods to providing services, and the service-producing sector has accounted for an increasing proportion of workers. In 1970, for example, there were 48.8 million service-providing workers, and 22.2 million people in the goods-producing sector, representing a service-to-goods ratio of 2.2 to one. By 2000, the number of workers in the service-providing sector was 107.1 million, compared with 24.6 million in the goods-producing sector, representing a service-to-goods ratio of 4.4 to one. This decline in the services sector is a big deal.
The decline in the purchase of services drives unemployment and the need for governmental stimulus. Spending will be very cyclical based on stimulus payment schedules and the business fundamentals of demand shift. The net/net? In this period, historic order patterns are a poor proxy for market demand. Redefine traditional demand management processes based on historic order patterns to model market patterns.
Need For Localized Assortment
The COVID-19 infection rate varies by state. The Statista model in Figure 3, represents the unemployement rate as of July 25, 2020.
As the economy wanes and waxes through the COVID-19 cycles, and we approach the period of a vaccine, market demand shifts are local. As a result, companies need to focus on localized assortment and build regional planning models. A broadbrush approach is fools play.
Respond locally, but plan globally, sounds easy, but it is not. For most organizations, this requires a redesign of planning.
In conclusion, in this critical time, we cannot generalize markets and it is imperative to sense market shifts and translate with minimal latency.
Good luck to all of my supply chain followers.
Link to Original Source