As the global disruption of COVID-19 intensifies, unparalleled challenges have developed suddenly for every aspect of business operations due to supply chain disruption, new employee requirements and cash flow considerations. Its times like this that can see more clearly the valuable role distributors play. They are a linchpin in our economy, not just in these times but every day. They keep the goods flowing between manufacturers and business customers and consumers. Distributors have many challenges right now but will be absolutely critical to helping us get through it.
It is no surprise at this point, as distributors’ customers are impacted, they are seeing a shift in the demand pattern, increased demand and stock piling of certain categories while other categories dry up. Sub-segments of distribution are being effected differently. Some segments are seeing a surge and are being stretched to fulfill demand, find inventory (Grocery, Healthcare, High Tech, Safety/Janitorial), others are seeing demand dry-up and need to be creative (Food Service, Building Supplies). This whiplash effect will make it very difficult to define the inventory and procurement strategy for quite some time and even after we are through this. Some parts of the supply chain are or may become unavailable due to geographic dependency, regulatory restrictions and/or manufacturing slowdowns. Distributors may need to find alternate sources of supply, focus on more flexible inventory management and effective communications with suppliers, customers and employees to help keep supply chains flowing with products.
Distributors are responding in a variety of ways to support and engage with customers, suppliers and employees. Here is a overview for each of these areas:
During this time customers’ expectations for the inventory available, delivery commitments, hours of operation are being adjusted and prioritized. Prioritization for key customers, critical customers and limiting new business to meet existing customer demand. In some cases, discouraging or not accepting returns due to staff limitations and safety concerns but also for cash flow reasons.
Distributors are using their digital channels to provide updated information on COVID-19, changes in their practices or policies and providing advice and support for their customers to quickly transform their business. For example, food service distributors are providing restaurants with help and tips on how to set-up their online ordering and delivery services.
Employee and workforce management challenges are significant and dynamic. Distributors’ employees who can, are working from home but many in the warehouse or out on the road, can’t. Customer service teams are inundated with calls from customers with questions about product availability. Distributors are shifting resources to these more critical areas. With the employee morale in mind, management are communicating frequently updates to both those working at home and to those who are facing an increased workload.
Constant communication, risk management and contingency planning with key suppliers is paramount along with identification of alternative sources of supply. In order to help with these immediate supply chain issues and disruptions, SAP is opening up access to Ariba Discovery so buyers and suppliers can connect for immediate and unique sourcing needs. This might help distributors who are having supply constraints, who are getting some unique requests from customers or see if there are requests on the network that they may be uniquely able to support. Just in the last couple of days we have heard some pretty remarkable stories. We had a one of our customer building one of those temporary hospitals looking for 700 hospital beds reach out to us and with the help of Ariba Discovery, we were able to connect them within 30 minutes with a new supplier that they would of never considered. Here is a link with more information https://my.ariba.com/Discovery.
Covid-19 will cause many challenges but some opportunities too. Some things may change in the industry going forward. Many distributors have unique capabilities that I am sure can be creatively leveraged to tackle today’s unique challenges and to pivot into new services and business models tomorrow.