Covid-19 Restart – Restarting of the material supply for manufacturers
When the day comes that manufacturers, and particularly SMEs, can restart operations, there will be significant constraints. A key one for many will be cash, despite all the Government support. Another constraint is going to be the data in the material planning system, regardless of whether it is SAP, MSDynamics NAV, or any other of the multiplicity of systems in use. Having been out of use for a protracted period, these systems need to be resuscitated to work effectively in the new reality. Companies will need to work fast to get the supply chain back in place to meet the new requirements of their customers. This article addresses short term restart issues, changes in longer-term strategy can then be looked at once the crisis subsides.
It is a truism, that supply chain planning needs precise data, which is seldom available. The data in many ERP/MRP systems is unlikely ever to have been as out of date as it will be on the day manufacturers' teams return from furlough/supporting the NHS/child care/self-isolation/shelter etc. Here are some areas to start looking at:
The due dates in the files of existing customer sales orders, internal works orders and supplier purchase orders are all likely to be in the past, and not useful for planning. There is a risk that some customers and suppliers have gone out of business; the sooner that is known the better. Some sales orders will likely not be required by customers, and therefore some POs and WOs will need to be cancelled. Dates for sales and purchase orders will need to be rescheduled in agreement with the relevant parties. Getting these files to reflect the new reality will ensure that the new system proposed orders are genuine requirements and will yield a return in the sale of a finished product.
REORDER LEVELS AND BATCH SIZES
Many manufacturers use batching rules and re-order levels derived from historical usage data. Companies should consider whether that historical data is the best basis they have for future planning. A new projected forward plan may need to be prepared. Batching rules are often not reviewed as regularly as they should be; take the opportunity to do it now.
Stock data should be OK; there might be a need to return materials to stores from cancelled works orders. When the demand is reset, it is worth looking at an excess stock report. Materials no longer required can be sold back to vendors or on to brokers (or within your network). One company’s excess stock might well be another’s critical shortage. If there is an opportunity to turn a balance sheet obsolescence provision into cash, this might well be a good time to take it.
There is a lot of detailed work required to resuscitate a materials planning system effectively, but remember to use Pareto analysis to prioritise the work. You can manage 80% of the value by addressing 20% of the materials and components involved. Priority focus is required on any items which can prevent you from delivering to customers; an assessment impact and likelihood of those risks will be useful
At ibd, we have numerous advisers with Supply Chain, warehouse optimisation and logistics expertise, from those with experience of business-to-business markets to consumer and not-for-profit. We can cover any sector specialism a company might require and can pool teams of advisers where a client might require a breadth of marketing support
This page is kindly written by ibd member and Supply Chain specialist Alastair Cameron Click here to view his profile