The Modern Supply Chain Is Changing

Posted on: November 5, 2020

COVID-19 has dangerously accelerated trends in the industry, leaving people behind.

The supply chain is everything for modern economies. Problems in the supply chain can lead to market shortages, disruptions to production processes, and more. The supply chain here in the United States has been rocked by the COVID-19 pandemic. Government restrictions, social distancing regulations, and lockdowns have devastated the retail and hospitality industries, forcing the entire supply chain to adjust. Between the massive shifts in demand, the need for new infrastructure, and regulation requirements inside the warehouses themselves, this has been a scary time for many companies. 

Fortunately, some of these changes have been hinted at through long-growing trends. Therefor, we can prepare for the future while also transitioning into the needs of the present.

Where Are We Now?

Government lockdowns and social distancing measures have shifted consumer demand significantly. Instead of going to restaurants, consumers have shifted spending to grocery stores and food delivery services, such as Uber Eats or DoorDash. Uber’s revenue from ride-sharing dropped 7% from last year, but Uber Eats’ revenue more than doubled in that same time. Retail stores have taken a hit as consumers are relying almost entirely on E-commerce–the likes of Amazon, Shopify stores, and omni-channel Retailer’s e-commerce sites. This, obviously, has impacted the supply chain. Consumption rates have changed drastically; for example, the demand in E-commerce specifically has risen by over 30%, where restaurant revenue is still down 27% (up from being down over 70% earlier in the year). 

Labor Costs of E-Commerce

This causes problems for companies in the chain. E-commerce’s labor costs are five times greater than retail or bulk supply distributions. Individual packaging, delivery, and distancing measures all increase the cost. This is exacerbated by the low supply of actual labor in the market, so more time and money must be spent to find workers in the first place. When suppliers need to meet the same demand, but have to do so entirely through E-commerce infrastructure and processes, these companies are staring down the barrel of an incredibly expensive gun. 

Moving beyond costs, these problems are causing market shortages further up the supply chain. Farmers have been forced to destroy surplus food and preemptively slaughter livestock to minimize their losses, all because getting those goods into processing centers, and then to market, has become unreliable or impossible. Processing plants have to adapt traditionally shoulder-to-shoulder jobs to social distancing recommendations and make changes to meet new regulatory requirements, which is forcing them to severely slow down processing or shut down entirely to refit. The labor market has been devastated as well, between quarantine restrictions and government assistance programs, leading to labor shortages. The consequences of the COVID-19 pandemic have sent shockwaves up and down the entire supply chain, and it’s struggling to adapt.

Finding & Addressing Operational Waste Is Essential In The New Economy 

Operations leaders have always been under pressure to contain costs and operate efficiently. But with the economic shifts brought on by the pandemic, the need to cut costs from redundant and underutilized resources, and re-deploy those funds into running, transforming, and growing the operation is non-negotiable. But without detailed cost analytics, COOs and GMs aren’t sure what they can change, where they can cut budget, or what processes they can optimize for the new environment. This environment is causing many to make knee-jerk decisions, cutting costs and making process and labor changes on a “hunch”. But those changes based on guesswork can prove to be costly, and have lasting consequences.

What these companies and facilities need in order to adapt, is to apply OpsFM (Operations Financial Management) principals. OpsFM analytics expose cost inefficiencies across people, shifts, equipment, facilities and processes. OpsFM brings accuracy and credibility to your toughest decisions. You can find inefficient areas of your operation, cut costs there, and take those savings to shift addressable spend into critical priorities in the operation.  

Amazon has been able to weather the storm, and thrive in it partly because their operations are already rooted in Operations Finance transparency, and using that financial data in their decision-making. For the rest of us, the difference between operations who react to this change with cost analytics, and those without, will be stark. It could mean the difference between staying in business, or not. Or keeping and losing customers.

Fortunately, our specialty is Operations Finance and performance analytics. Our purpose-built solution exists to give companies like yours the comprehensive reporting and analysis you need to make informed decisions. It reads data from all over your facilities, letting you track the efficiency of specific processes, facilities as a whole, and even the performance of specific individuals. This information gives you what you need to cut costs, streamline your operations, and more easily adapt to the new supply chain environment. We can help you get the visibility you need to survive and thrive in modern times. 

This isn’t an easy time for any business. The entire status-quo has been turned upside-down by the pandemic, leaving it up to us to adapt. Our customers and friends in logistics operations are finding creative ways to optimize their labor allocation and improve their process efficiency. Contact us to better understand how to leverage your own facility data towards long term growth and cost savings. 

Written by Dan Keto, President and CTO at Easy Metrics.

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