The COVID-19 pandemic has radically altered the demand for products and services across all sectors and exposed the weaknesses and fragility of global supply chains and service networks. At the same time, it was striking how well and quickly many companies have adapted and reached new levels of visibility, agility, productivity and connectivity with the end customer without neglecting their cash flows. Leading merchants, for example, leveraged their eCommerce capabilities to distribute food to thousands of customers confined to their homes. However, this isn’t a possibility for all companies. Jorge Zuñiga Blanco, a successful entrepreneur and eCommerce expert, details how businesses can become more resilient and fluid following the COVID-19 pandemic.
The virus has shown that, if aligned around a common goal, operations teams can achieve goals deemed unviable before the crisis. And as they plan the development to the new norms, businesses are searching for techniques to preserve this sense of direction and pace. Many leaders have been inspired and energized by the progress the crisis forced them to make. Production lines reached record levels of availability and performance. “This has inspired companies to improve their sales and distribution capabilities to meet this new type of demand,” asserts Zuñiga.
Successful businesses will redesign their procedures and supply chains to preserve their market against a broader class of possible blows and disruptive incidents. Companies will review the geographic distribution of their assets. In consumer services, for example, we expect the crisis to significantly increase the adoption of online and omnichannel models. With operations recovering, some of the major retail banks are considering significant changes to their branch networks to adapt to new demand patterns.
The trend of product value chains towards regionalization could also accelerate, as companies are reassessing the risks of having globally integrated asset networks and production chains. For example, to improve agility in the face of a regional shutdown, a leading fashion industry company has already begun to develop new sources of supply complementary to its current network in Southeast Asia.
“To succeed in the new scenario of normalcy,” explains Zuñiga, “companies will have to achieve a substantial improvement in their resilience without causing unsustainable cost increases. Accelerating the digitization of operations will be critical to solving the traditional dilemma between efficiency and resilience. New digital technologies are already improving companies’ ability to predict problems, make effective decisions and quickly adapt their operations.”
During the crisis, many businesses overcame personnel deficiencies by automating processes or forming self-service methods for customers. These methodologies can speed up workflows and reduce mistakes, and are well received by consumers. Automation can cut, by as much as 50%, back-office and billing tasks, as well as nearly half of technical call center activities, freeing up agents to solve the most complex orders and where they can add more value.
A good starting point is to review operating costs. Methodologies that take advantage of technology can accelerate the work of improving transparency and summarize months of effort in a few weeks or days. These digital approaches include purchasing expense analysis and clean-sheet models, end-to-end inventory balancing, capital expenditure diagnosis and portfolio rationalization.
Operations functions can also play a central role in companies’ cash and liquidity management activities. To optimize an organization’s cash position under a volatile post-crisis scenario, it will be essential for companies to improve the visibility of the cost structure of their own operations and those of their suppliers. Similarly, many service organizations have neglected the construction of data centers that require large capital investments to replace them with a more flexible option, such as contracting capacity to cloud providers. We anticipate that this trend will accelerate in the service sector and expand to other industries.
Recovery from the crisis will also be a catalyst for changes in the way tasks are carried out. Since physical distancing measures are likely to continue for some time, remote work could become the norm for much of the staff. As organizations master the challenge of managing physically distributed operations teams, they will be able to adapt their operational models and deploy local staff in the field capable of exploiting the expertise of remote specialists using digital connectivity tools.
In some cases, organizations can go beyond ecosystem coordination and restructure through mergers and acquisitions. Depending on the industry, M&A opportunities can be informed by the potential value generated by new operations, either through the generation of operational synergies or the development of new competitive capabilities resulting from vertical or horizontal integration. In this way, the operations function can play an essential role in identifying new ways to create competitive advantages along the value chain. For example, investing in local producers of essential raw materials can help manufacturers ensure continuity of supply.
Given the likelihood of prolonged uncertainty regarding supply, demand and availability of resources, we believe that COVID-19 will be the trigger for operations functions to adopt agile transformation methods. Teams involved in the transformation will need to respond quickly to changing circumstances and adjust planning, design, and execution as new information becomes available.
