Use a business intelligence strategy to prepare for supply chain disruption
The full economic impact of the coronavirus is still unfolding, but now is the time for executives and supply chain managers to plan for many scenarios that can play out. A business intelligence strategy is instrumental in helping affected companies recalibrate and adjust. Leaders with clear visibility into their suppliers can review inventory levels and devise strategies to appease the customer base. Those executives who acknowledge the situation using their data, rather than wait and see, will cushion the blow, especially if the disruption persists.
The effects of the coronavirus are being felt now in the global supply chain across manufacturing, distribution of goods and transportation. A business intelligence strategy can help these businesses to map suppliers, understand real inventory levels and determine plans to keep customers happy.
A business intelligence strategy provides visibility of your suppliers
If you source materials, products or parts from suppliers, the BI mapping tools in Phocas help to determine your level of exposure to China and other countries that have been impacted by the Coronavirus such as Korea and Japan.
You can review all of your supplier data by purchase date, size of order, customer type, product line, time to ship and contractual terms (what does your insurance cover etc.). This information helps determine what products or parts you have ordered that are in local warehouses and therefore what orders you can fulfil. If most of your business relies on a few suppliers, your loyalty might afford you more access to the product that is stored offshore from China or was in transit before the travel bans.
From all reports, the automotive industry is still at less than 50 per cent of its pre-virus production rates. While some Chinese parts suppliers have partially resumed operations, those in Wuhan have postponed resumption. These delays have created a ripple effect on domestic and overseas OEMs, which are interrupting production. In this instance, an automotive supply business will need to go to its tier 2 suppliers located in other parts of Asia or South America. Are they offering any alternatives to getting the product to you if you put in a large order?
When implementing Phocas business intelligence, we meet supply chain managers who are unaware of the location of their ‘true’ suppliers because the sourcing is done via a third party. The transparency and detail of the purchasing transactions in a BI tool help managers make clear decisions. Tightly managing your direct and indirect suppliers with accurate data brings benefits and efficiencies - in good times and bad.
A business intelligence strategy allows you to review inventory levels
As inventory is a specialized function, it can be overlooked in business, yet, in reality, it involves the entire company. The inventory planner or warehouse staff have the management of inventory well in hand, but during this type of disruption or for business-as-usual, it's become necessary for everyone to access this data because they are also affected by the flow of inventory.
The challenge for the customer account managers and sales teams during an extended coronavirus is to stop revenue erosion. The focus at this point should be on balancing supply and demand as well as building buffer stock. Here, the status of backorders and of forward ordering, are key factors in determining what customers you can supply.
A business intelligence tool is useful to help you determine:
- Purchase orders and purchase receipts – to identify what’s arrived in the warehouse
- Brought-forward value – what stock is still available from the last period
- Identification of likely shortages - based on regular conditions and then for 'virus' disruption
- Inter-company movement stock analysis - what departments get priority
- Sales orders, invoices, backorders and forward orders in any combination, sliced & diced to your requirements.
This information will allow your team to devise a company-wide strategy for the new trading conditions. New business will be difficult to obtain when both demand and supply are down but your data can help you determine how best to look after your existing customers with the inventory you have access to.
A business intelligence strategy helps you manage your customers
Truly understanding your customers is critical to running a business and is one of the fundamental benefits of a business intelligence strategy. In regards to this disruption, it might be in your interest to ensure the highly profitable customers get priority.
A comparison between profitability and sales value can help you understand your customer base better. As total numbers - sales and profit, it might not be evident that a customer with high sales value isn’t as profitable as you think.
Another critical factor in analyzing customer profitability is the cost of serving individual customers. During this challenging period of slow down, use your data to understand your customers’ behaviour and the factors that influence the cost-to-serve.
Pinpoint what customers order standard product versus custom product - can you ask for more time for delivery of the customized version? Can you also delay the small orders because they have not met the 'epidemic' threshold? Work on some new strategies to change the unprofitable behaviour.
You can also use your BI tool to devise a customer response based on territory or industry category - find the areas where customers are still buying because they're least affected by the Chinese market.
You will need to re-forecast your revenue based on ‘new’ demand patterns for the next six months. Demand for products is decreasing especially from Chinese customers– so adjust your revenue forecasts based on your new discussions with customers and what you can fulfil based on what suppliers are telling you and the availability of alternative supply.
Those companies who are prepared and put in mitigation strategies using a business intelligence strategy will be better placed to deal with a protracted disruption to the supply chain.
To learn more about how best to use a business intelligence strategy to be ready for further disruption get a copy of 2020 BI trends here.
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