Supply Chain Perspective—Since the Pandemic to Where We are Now
As we look back at some of the challenges that organizations in the natural products industry and beyond were faced with over the last three years, words like agility and responsiveness were commonly used. Why is that? COVID-19 exposed a lot of gaps in organizations from all over the world that drove a lot of planning changes and instabilities, resulting in reactive measures that were needed in order to keep things moving forward and to provide value to their customers as best as possible.
This meant accepting challenges such as expedited charges and delivery performance degradation, longer leads times in ports, carrying additional inventory to cover up internal/external planning gaps, sourcing material from any supplier that could provide the raw materials needed for the short term, price inflation for goods and services, and much more.
To say it has been challenging for most organizations is an understatement, but to assume that reliance on reactive measures is a sustainable approach is unrealistic. So where should the supply chain practitioners of the world focus their attention moving forward? For starters, while the necessity for being agile to change and responsive to customer needs are conditions that are not likely to go away, they just need to be balanced better with reliability in long term processes to regain a sense of feeling a little better prepared going into the future.
Practices like building a PFEP (plan for every part), exploring supplier rationalization with strategies that focus on risk mitigation, and looking to build partnerships with suppliers that can support your growth trajectory as an organization are all keys to success, especially in the supplement industry, due to the high level of year-over-year growth.
Industry Staffing Challenges and Supply Chain Impact
Staffing and its impact on supply chain also remains an important issue in the natural products industry. The hiring process in general across most industries has been faced with unprecedented challenges that have placed a new type of stress on the average organization. When looking at supply chain from end to end, while trying to understand the root cause of these external factors that drive internal challenges relating to proper staffing balance, utilization of the PESTLE (political, economic, social, technology, legal, environmental) approach to understand the various reasons has helped to shed some light on some of the more common struggles that are being experienced.
Understanding your operational risks and predictable productivity levels is made up of many contributing factors; however, since COVID-19, staffing has become more of a daily and/or weekly metric that is being used to understand potential concerns that might arise in the near future, which would impact company financial goals.
Exploring flex schedules and establishing work-from-home policies were once viewed as strategic steps to offer as an incentive to potential new team members, but now these options are more of a standard practice that should be viewed as an ongoing approach to retain adequate staffing levels. Having this flexibility from the beginning allows for a very transparent organization to stay ahead of current everyday challenges of the workforce (gas prices, high cost of living areas, time wasted traveling, etc.).
There is plenty of technology in today’s world that can tackle most remote work needs. Not to mention, an organization’s recruitment efforts are no longer limited to a specific geographic location, making the candidate pool much broader. The talent levels increase exponentially due to utilization of a more global viewpoint, and it all starts with the realization that today’s problems don’t always have to be resolved in an office.
When looking at positions that cannot physically allow for remote work, understanding competency gaps and balancing growth rates are key. As companies are needing to ensure that the right level of skill sets exist amongst the organizational teams, taking the time to balance these two factors from the very beginning will help develop the right course of actions and roadmap to tackle the ongoing staffing level issues.
Start by looking from within the organization, as this would be the simplest way to address hiring needs. Develop an internal skills matrix and analyze competency gaps. Defining the skills needed for each role and assessing your existing team may help employers discover some hidden skillsets that might tackle some of their recruiting needs.
Climate Change and Supply Chain
Climate change is another ongoing supply chain concern and a topic that leads down many paths of discussions. In its simplest form, climate change has a substantial impact on today’s supply chains. Where? Let’s just focus on rising temperatures and direct correlation to crop stability. Yes, there are specifications to adhere to when raw materials are grown and produced, but if temperatures are rising and specifications are unable to be met, corrective action needs to occur faster and more often to maintain the process controls. This means organizations need to be aware sooner of what “might impact” downstream supply chains by utilizing tools that support more predictive modeling.
So, what are ways to handle gaining control over these ever-increasing global shifts? Higher levels of awareness for the need for vertical integration from crop to customer is a great first step. A more vertically integrated organization has better control and more directly owns some of the more commonly outsourced cross-functional processes and services such as cultivating, harvesting, safeguarding crops, and so forth. Hoping crops won’t be impacted is far too risky of a plan and should be avoided as much as possible, so working to build the stability in the process controls maintained at the crop preparation level will drive the most process control. If vertical integration is not a possibility for your particular organization, then finding the right partnerships who are vertically integrated to offer a wider range of services to support your herbal and other natural products industry raw materials needs is the next best option.
Managing Through Today’s Supply Chain Challenges
Overcommitting and underperforming are what every organization tries to avoid as much as possible. It leads to lost sales, upset customers and lots of phone calls. So, how do you prevent this from occurring in today’s industry? Following are some suggested strategies:
• De-Complexity Management—Manufacturing products on time is challenging enough, so know when to remove tasks that just impede flow in the end.
• Segmenting your Organization—This allows you to group your risks and performances in a manageable manner that makes certain you are focusing on the key value chains that ensure you hit your monthly financial goals. As an example, if you were to view your key product families, volumes, revenue, margins, supply chain strategies (MTS/MTO) on a matrix by country or region, customer, etc., it would help focus the team’s initiatives. It might show certain regions need to be better managed, certain customers need more attention, certain strategies need to be better deployed.
• Escalation Process Control—Problems will arise, and everyone knows it, but when they do, how you align with your customers and internal departments will help them better prepare for the changes and manage the situations as they occur. Develop the escalation process with tiered controls and timelines.
Utilization of the latest technology available can also provide valuable supply chain management support. Digital twins, Machine Learning Capabilities and Network Optimization Modeling have matured greatly over the last few years. Why? Because lead time is becoming more and more challenging. So, building a digital twin to current process to see how it would respond to changes, introducing industry standard software to analyze options for delivery routes or modes, or even initiating a purchase proposal in an enterprise resource planning (ERP) system directly from the manufacturing line without any human input all help reduce days and potentially provide a competitive edge.
Additionally, with a lot of organizations building up inventory over the last few years due to variability, space constraints became obvious. Utilizing flex warehousing and pop-up warehouses are perfect solutions to managing demand spikes and short-term warehousing needs. If space and demand are hard for your organization to get a handle on, this solution might deliver the value you are looking to find.
Understanding the Voice of the Customer
As we continue to move forward in a challenging supply chain environment, understanding the VOC—voice of the customer—is key. It is critical to clearly understand what both internal and external customers value and develop your processes with that in mind.
All too often organizations spend time building more structure and processes to deliver products to customers that, if asked, aren’t even a priority to the customer themself. This in turn causes a disruption in flow, increased complexity, and longer lead times to deliver.
In short, by not taking the time to truly understand what the customer values, the likelihood of underperforming is more apt to occur as resources can be spent working on things that would be considered nonvalue added to the customer. As an example, if a customer would prefer a longer lead time with higher reliability versus shorter lead times with higher variation, this could help an organization better strategize and plan, keeping the right values on the radar at all times.
So, understanding and keeping the VOC in mind will be invaluable as organizations in our industry and beyond continue to face supply chain challenges.
Todd Hass, vice president of supply chain at Lief Labs has 20-plus years of experience in multiple industries delivering increased reliability in processes, designing responsive customer centric solutions and developing more agile business models that align with real world demand. At Lief Labs, Hass lends his experience in leading change, engaging teams and building an organizational problem-solving culture. His passion for inventory and warehouse optimization, implementing procurement best practices to achieve world class levels, enhancing logistics and transportation efficiencies and overall E2E viewpoint is one that challenges processes and always looks for ways to continuously improve and build culture at the same time.