Three ways supply chains have shown flexibility during the Coronavirus (COVID-19) pandemic

Date : 03 April 2020

Kathleen McLoughlin

Senior Supply Chain Analyst

This article looks at three ways supply chains have been flexible in overcoming some of the challenges that COVID-19 has introduced.

1.    Relaxing of legislation and regulation

We have seen governments around the world temporarily relax legislation to increase the velocity of essential supplies (food and health-related items) through the supply chain.

One of the first areas of legislation to be relaxed in the UK was GB and EU drivers’ hours rules.  Around the same time (March 20), the UK government temporarily relaxed elements of competition law to allow supermarkets to work together to “feed the nation”.  This meant that retailers could share stock level data, share distribution depots, vehicles and pool staff.  More recently (March 28), the UK government temporarily suspended regulations to fast-track supplies of PPE to NHS staff.

The UK government said of the relaxation to drivers’ hours rules, “any relaxation of these rules should only be considered where genuinely necessary and when other supply chain management interventions are unable to alleviate issues.”  This demonstrates that there are only very specific circumstances under which relaxation of rules can be applied.

Businesses should consider the potential for action like this as part of their risk and contingency planning going forward. While it should not be relied upon, scenario planning, as part of a wider strategy to mitigate risk will allow businesses to respond most effectively in future.

As the situation evolves and new supply challenges emerge, there may be further temporary relaxation of legislation. It will be interesting to see whether any legislative changes survive beyond the crisis.  For example, China relaxed regulations around the use of autonomous delivery vehicles during the outbreak and incentivised retailers to purchase them.  Manufacturers of such vehicles, including Neolix in China, hope that this will accelerate the use of their vehicles going forward.

2.    Alternative routes to market

As a result of restaurants, hotels and schools closing and people being told to stay at home except for a limited number of specific reasons, businesses have had to use a flexible approach to tap into alternative routes to market for their products.

Major retailers have prioritised the elderly and vulnerable for home delivery slots. This, combined with the lack of sufficient capacity to meet the excessive demand for home delivery, has meant that customers who don’t fall into these groups have needed to look elsewhere as they try to minimise physical trips to a supermarket.  

This has presented an opportunity for foodservice suppliers, catering suppliers and smaller food businesses, such as farm shops, to find new customers for their products.  Such companies have also tried to sell their products to retailers.  For example, in the UK, Sainsbury’s has trialled selling Brakes’ catering-sized products and Iceland has used Brakes to supply milk. 

The situation has also forced retailers to develop and allocate more resource to routes to market that encourage social distancing, e.g. home delivery, click and collect and drive-thru. For example, Kroger in the U.S. is piloting a pick-up only store and Walgreens, also in the U.S., has introduced drive-thru grocery shopping.

Retailers in China have used their advanced e-commerce platforms to assist farmers who faced high levels of product wastage, selling their products to the general public through online live streams.

This has forced businesses to quickly develop the necessary capabilities to utilise different routes to market, which will likely serve them well beyond the current time of crisis.  Consumers are becoming more accustomed to using different shopping channels during this period and discovering the convenience that options such as online shopping for home delivery and pick-up/collection provide.

Whether changes to shopping behaviour established survive beyond the pandemic, and understanding how this affects resources in the supply chain will be important for businesses looking to bounce back quickly.

3.    Manufacturing flexibility

Some manufacturers have seen demand for their products decline.  As a response, they have switched their production to products needed to fight COVID-19.

The demand for hand sanitiser has skyrocketed in recent months, often being one of the first products to run out or have purchasing restrictions placed upon it. As the main ingredient is alcohol, manufacturers of alcohol-based products, such as perfume and alcoholic beverages, have shifted production to hand sanitiser.

In the UK, HMRC said it was prioritising applications from manufacturers to produce denatured alcohol. The British Honey Company and Brewdog are examples of UK manufacturers to have made the switch from alcoholic beverages to hand sanitiser.  

This follows French luxury goods company, LVMH, which has been producing disinfectant gel at its Christian Dior, Guerlain and Givenchy factories, to be distributed to hospitals in France.

The switch has enabled manufacturers to utilise their raw material stocks, keep their production lines operational, keep their staff working and produce products which are key in fighting COVID-19.  It has helped manufacturers survive the crisis while giving them the option to make meaningful charitable contributions – Brewdog is donating its sanitiser to local charities and the community.  

Manufacturers finding themselves with spare capacity can consider whether they are also able to switch production to any products key in fighting the virus and whether the demand exists.  The situation is likely to change quickly and products that are a priority now may not be as much of a priority in a few weeks.

It will be interesting to see whether any of these new products will be incorporated into these manufacturers’ product portfolios going forwards.  For example, if people are much more concerned about health and hygiene in the post-COVID-19 world, ongoing demand for hand sanitiser may be higher than before the crisis and these manufacturers may wish to continue producing it.

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