How five companies were forced to shake up their existing supply chains in response to the coronavirus pandemic
Unilever offers a prime example of a multinational reconfiguring its supply chain in a fast-moving crisis. The maker of household brands such as Dove, Clear and Lux acted with agility in switching up its production lines to new products quickly. Demand for many of its household cleaning products exploded around the world. But before Covid-19, one product - hand gel - was a relatively small part of its global business. Today, however its hand gel brand Lifebuoy is set to be a [Euro] 1 billion brand for the business.
To produce hand gel at scale in weeks - increasingly capacity 600 times - Unilever adapted its deodorant factory in Leeds as well as others around the world. The change resulted in the company launching the brand in 50 new markets in less than 100 days.
The Anglo-Dutch business has also transformed its 20-year factory in Hefei, China, into one of the world’s leading digital manufacturing sites. The operation now has a digital end-to-end ecosystem, using AI across the production process, and allowing some operators to work from home during lockdown.
The shift – already underway pre-pandemic - to digitally transform supply chains has, as Unilever shows, accelerated under covid-19.
“This crisis has highlighted that global, agile, and adaptive supply chains are very much a competitive edge for businesses …,” says Victoria Cuthbert who is the Head of Supply Chain Home Care.
When the UK locked down on 23 March Ella Rauen-Prestes, CEO and founder of FitBakes, the low sugar, high protein cake maker, came up against an inflexible haulier, a import logjam and a factory at a standstill.
Rauen-Prestes did not however give up her permanent, well-paid tech job to let her two-year old start-up flounder because of a pandemic. She sat down with her team to review the business’s supply chain.
One of the first challenges was to find a new supplier for the Belgium raw chocolate critical to many of the products. FitBakes imported chocolate from a Belgium supplier but imports had dried up due to the Europe-wide lockdown. Fortunately, she found a local back-up supplier for the short-term.
Rauen-Prestes also had to get the Northampton-based factory up and running quickly. One of the packing machines required two people working closely but social distancing rules forbad that. An ingenious solution presented itself, however. Fitbakes redeployed a married couple, who worked elsewhere in the business, to man the machine in question.
Supplying products had also proved problematic when the company’s regular large haulier failed to rise to the challenge, so she found a small local haulier. She has decided to stick with the local company for the long term, as they are more agile at a critical time, Rauen-Prestes says.
When Tesco saw seven weeks’ worth of stock of some products selling out in one week in early lockdown, the supermarket knew it had to act fast. The company worked closely with suppliers to simplify ranges on the most in-demand products, reducing the number of toilet rolls in their range from 33 to 10 different types, for example.
Tesco also cut multi-buy promotions so that suppliers could focus on meeting the increased demand. In turn, the supermarket was able to boost its online deliveries to the most vulnerable customers. These changes resulted in the company having to hire hundreds more staff to fulfil demand.
At the start of the pandemic, its online capacity grew from around 600,000 weekly delivery slots to 1.5m slots today, more than doubling online delivery capacity in just five weeks. Its online grocery business has grown from around 9% to over 16% of Tesco’s total UK sales, ensuring that the business continues to invest now and for the future.
Like some other large retailers, Tesco committed early on to paying for goods on order, particularly in the clothing sector, one of the sectors hardest hit. Tesco paid on time and in some case earlier than usual, for clothing orders, and it currently retains those payment terms.
Back in April, iconic bikemaker Brompton adapted its supply chain and production to build up to 1,000 folding bikes for NHS staff by launching the Wheels For Heros crowdfunder. The aim was to raise enough funds to supply NHS staff with bikes so they could get to work safely during the lockdown.
Initially the company committed production capacity worth around £100,000 to fund the bikes, but the crowdfunding drive raised £344,785 in 78 days by 19 June.
Despite having to cut production capacity due to social distancing on the assembly lines - each station is normally 1.7 metres apart - Brompton didn’t lose a single day of production.
The company is now producing more than 1,200 bikes a week despite the production changes the pandemic wrought. In part its smooth-functioning supply chain is down to the preparation the bikemaker achieved ahead of the previous Brexit departure date, which later shifted to 31 December 2020. In preparation for Brexit last year Brompton stockpiled parts from its overseas suppliers.
What the pandemic has taught the business is that it is vital to embed agility in all aspects of the supply chain and wider company to ensure it is resilient for the future.
For Nick Coleman and Udhi Silva, co-founders of snacks brand Snaffling Pig, the pandemic not only forced them to reset their own supply chain but that of other snack brands, too. In early April they launched Startup Logistics to optimise others’ supply chains to refocus sales from retail to consumers.
The idea for an entirely new business was triggered by the huge loss of revenue for Snaffling Pig from its main customer base, pubs. The duo was left with warehouse space and systems to spare. Not wanting to waste their available capacity and understanding that other food and beverages businesses were facing the same disrupted and delayed supply chains as them they established the new business. Startup Logistics provided the warehousing, distribution, customer relationship management systems to get brands’ products to consumers.
“We had to respond with real urgency – as a business we had to act faster and better than we ever dreamed possible. With hospitality and pubs revenue closing, we went back to our real strengths; packing, distribution and supply chain, and flipped all our energies there,” Silva says. Consumers, stuck at home during lockdown and keen to treat themselves, became a huge chunk of the Snaffling Pig’s business with the company seeing a 200% sales increase.
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