Goodbye to Just in Time Supply Management | More4apps

When Just In Time Becomes Just Didn't Make It

If COVID-19 supply chain disruptions weren’t bad enough, having 12% of world shipping blocked at the Suez Canal was another blow to business​

David Wright
David Wright

Product Expert

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Back in the day, pre COVID times, cost accountants would tell you, money tied up in stock is a waste of working capital. Aside from cash flow, there were other negative issues such as storage costs and the chance of products expiring, leading to wastage. Something in today’s eco-aware times is less than ideal.

The mantra for many supply chain experts became a never-ending focus on supply chain optimization and product improvement, where just in time supply at the best possible price was king. And ideally, this supply came from a single source.

As a result, we had removed buffers such as having safety stock on hand reducing and shrinking our supply chain, leaving us exposed, without the ability to absorb disruptions. Then we hit a Black Swan event – COVID 19.

We’ve all seen the headlines and heard the commentary and dealing with issues related to this major disruption to our daily lives; product shortages and delayed shipping time frames were to become a new reality. Most ignored the early warnings, blaming Covid and hoping it would “come right”. But it hasn’t.
Added to this, we now have another one-off logistical event with a ship blocking the Suez Canal – creating more backlogs and causing the price of oil to go up.

The importance of supply chain resilience

But what does this really mean – simply put we are left in a situation where JIT becomes “Just didn’t make it” or “Just Delayed”. And this is a real cost to your organization and ultimately to your customers.

So, what can you do? Unfortunately, not as much as you’d like! There is no magic wand that will unblock the supply chain bottlenecks. But you do have some wiggle room and it’s a chance to prepare yourself for future disruptions – not all negative, by pre-empting some changes, and yes this will cost… but not as much as empty warehouses, production line stoppages and the inability to meet customer demand.

To start with, if you haven’t already, look at alternative supply sources. You might be able to source from an alternative supplier closer to your manufacturing and/or distribution centers and not in the same location as your current supplier. There is a high chance there’s a premium for this when you look at the material cost alone but definitely gives you more security of supply. Don’t drop your current supplier, just add a secondary supply.

Disruption is the new normal

Stick with the reality of disruption and factor it into everything you do, for this you’ll have to update your safety stock levels, min/max and reorder point planning levels adding in a level of insurance to reduce the chances of stock out. You may need to create additional purchase orders with larger lead-times to pre-empt a certain amount of disruption, even assume, for example on average supplies will be late by a specific amount.

Change your product mix. There are plenty of examples where distilleries started making sanitizer. This is a massive pivot. Maybe your organization has the capability to do similar things, just for different businesses that are extremely busy due to the latest set of disruptions. Ideally, you’ve moved to a “recovery mode” and are looking at your longer-term plans.

Have you thought about positive disruption too?

Let’s look at an example.

One day in the future, COVID will not be a disruption. Pivoting to the post Covid world will be an interesting one, full of opportunities. Once countries start seeing the light, those fortunate enough to be fully employed won’t be doing as much travel. To start with there aren’t the pilots let alone the planes. What will they do with that extra money? Buy cars, recreational toys or perform household renovations!

If we look at places like New Zealand and Australia, people’s day to day lives aren’t that different to pre-COVID. Tourism is the exception to this. Since people can’t go abroad, sales of boats, jet skis, bikes and even wetsuits have gone through the roof. In other geographies, after more than 12 months of disruption to normal life, there will be a spending boom, as people escape the grip of COVID. It’s just a case of when and where.

How are you and organization adjusting and preparing for the challenges such as a stuck ship or people suddenly all shopping once, be it panic buying or once they release the shackles of COVID?
We are now realizing there are many risks that just can’t predict and now need to be ready to move quickly when they arise.

A single source of data is critical for a nimble response.
One thing you can do is have accurate and usable data in your ERP system. You need to be able to plan and execute alternative supply of materials in weeks not months. You also need to make sure that you aren’t caught short and end up selling products at a loss. Changes to price lists have to be quick and proactive. Ask yourself, can your users make changes in a timely, easy and accurate manner?
From updating your item master, adding suppliers, purchase and sales orders to adjusting price lists you need to be able to make changes and make them quickly.
That’s where More4apps comes in with it’s range of end user Excel Solutions for Oracle EBS and now for Oracle Cloud ERP.

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