Zero-based Supply Chain: Accelerating COVID-19 recovery
July 1, 2020
COVID-19 has disrupted supply chains everywhere
No industry, geography, or channel has been spared from supply chain disruption as the COVID-19 pandemic has spread. The range of supply chain impacts is long and varied:
- Demand drop-off (food service, fashion apparel)
- Demand spike (health/hygiene/personal care goods)
- New/shifted demand across channels (on-premise vs. grocery retail)
- Lower operational productivity (health and hygiene requirements, government-mandated shutdowns)
- Stranded inventory, drastic over/under stocks
- Raw material/input stoppages or shortages
Pressure will increase to manage supply chain costs
Cost of goods sold (COGS) contributes 40 to 70 percent of a business's cost base.
COVID-19 has disrupted end-to-end value chain, with challenges every step of the way: Sourcing raw material production and logistics; manufacturing during plant shutdowns and social distancing; and delivering amid reduced warehouse operations, and transportation restrictions.
Cost profile by industry
Building resiliency
Ensuring resiliency now for success in the future means companies need to prepare supply chains and production networks to balance reliability with responsiveness. Businesses must not only act now but also plan for future disruptions to protect COGS and margins in the Never Normal world.
Applying a zero-based lens across the supply chain provides the visibility needed to make deployment and cost containment decisions, identify opportunities for immediate relief and risk balancing, and execute with resilience: All supported by a deep analytics backbone.
A Zero-based Supply Chain (ZBSC) provides the building blocks to accelerate this journey rapidly. By radically shifting cost curves and boosting performance across the supply chain, businesses can create new value to fuel sustained growth in the Never Normal world.
What to expect in the Never Normal supply chain
Changing consumer behavior will affect what, where and how goods and services are delivered amid social distancing and move to online ordering.
More unprecedented events are expected, demanding a more reliable and flexible supply chain to shift in response to changing impacts across the supply ecosystem.
Cost structures will move from more fixed to more variable, with investments in accelerating digital transformation and investing in areas to build ability.
Visibility and analytics will be essential for companies to focus efforts, drive scenario planning, and rapidly respond to changing consumer demand.
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Case study: Driving visibility and value in healthcare
One healthcare player struggled with clinical expenses as pressures increased on payments for services and costs steadily rose.
ZBSC was leveraged to drive visibility and target value. As a result, administrative, production, and operational performance gaps were identified across 300+ practices, identifying 3%+ in EBITDA impact in less than 10 weeks.
The effort played out at the advent of the COVID-19 pandemic. Accenture rapidly completed dashboards to create deep visibility for the leadership to understand the overall utilization landscape. This helped them swiftly adjust staffing to meet all needs and manage total costs during the pandemic and beyond.
Preparing for uncertainty
Amp up on-demand visibility:
- Build a robust mechanism to understand demand patterns
- Create on-demand visibility for scenario planning
- Establish an intelligent control and monitoring capability
Rethink costs:
- Begin thinking about "should-cost" models
- Challenge historical costs in the Never Normal
- Focus on changing organizational mindset on must-have versus nice-to-have capabilities
Supercharge ecosystems – Establish ecosystem and digital capabilities to go asset-light:
- Ramp up the digitization of capabilities across the ecosystem, allowing cost to be more variable and on-demand
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