capacity, the S&OP process should determine As the finance function works on accounts which products offer the highest strategic value, payable and receivable, supply-chain leaders can considering the importance to health and human focus on freeing up cash locked in other parts safety and the earnings potential, both today of the value chain. Reducing finished-goods and during the future recovery. The analysis will inventory, with thoughtful, ambitious targets draw on a cross-functional team that includes supported by strong governance, can contribute marketing and sales, operations, and strategy substantial savings. Likewise, improved logistics, staff, including individuals who can tailor updated such as through smarter fleet management, macroeconomic forecasts to the expected can allow companies to defer significant impact on the business. Where possible, a digital, capital costs at no impact on customer service. end-to-end S&OP platform can better match Pressure testing each supplier’s purchase production and supply-chain planning with the order and minimizing or eliminating purchases expected demand in a variety of circumstances. of nonessential supplies can yield immediate cash infusions. Supply-chain leaders should Identify and secure logistics capacity analyze the root causes of suppliers’ nonessential In a time of crisis, understanding current and purchases, mitigating them through adherence future logistics capacity by mode—and their to consumption-based stock and manufacturing associated trade-offs—will be even more models and through negotiations of supplier essential than usual, as will prioritizing logistics contracts to seek more favorable terms. needs in required capacity and time sensitivity of product delivery. Consequently, even as companies look to ramp up production and Building resilience for the future make up time in their value chains, they should Once the immediate risks to a supply chain have prebook logistics capacity to minimize exposure been identified, leaders must then design a to potential cost increases. Collaborating with resilient supply chain for the future. This begins partners can be an effective strategy to with establishing a supply-chain-risk function gain priority and increase capacity on more tasked with assessing risk, continually updating favorable terms. risk-impact estimates and remediation strategies, and overseeing risk governance. Processes To improve contingency planning under rapidly and tools created during the crisis-management evolving circumstances, real-time visibility will period should be codified into formal documen- depend not only on tracking the on-time status of tation, and the nerve center should become freight in transit but also on monitoring broader a permanent fixture to monitor supply-chain changes, such as airport congestion and border vulnerabilities continuously and reliably. Over closings. Maintaining a nimble approach to time, stronger supplier collaboration can likewise logistics management will be imperative in reinforce an entire supplier ecosystem for rapidly adapting to any situational or greater resilience. environmental changes. During this process, digitizing supply-chain Manage cash and net working capital management improves the speed, accuracy, As the crisis takes its course, constrained and flexibility of supply-risk management. By supply chains, slow sales, and reduced margins building and reinforcing a single source of truth, will combine to add even more pressure on a digitized supply chain strengthens capabilities earnings and liquidity. Businesses have a habit in anticipating risk, achieving greater visibility of projecting optimism; now they will need a and coordination across the supply chain, and strong dose of realism so that they can free up managing issues that arise from growing product cash. Companies will need all available internal complexity. For example, Exhibit 3 shows how a forecasting capabilities to stress test their capital digitally enabled clustering of potential suppliers requirements on weekly and monthly bases. shows the capabilities they have in common. 80 What now? Ten actions to emerge stronger in the next normal September 2020