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1. Explain how the corona virus affect the supply chain in food industries starting from supplier, manufacturing and distribution.
2. Explain how the uncertainty in demand and supply is addressed in the article
3. Explain the solutions the article suggested to mitigate the uncertainties in the supply chain due to COVID-19.

As the coronavirus crisis deepens in Europe Bo Zhou, CEO of supply chain software specialist FuturMaster, shares insights into managing the crisis and lessons learnt from keeping the cogs turning in China. "Everything that seems normal everyday becomes totally impossible."

The food supply chain in Europe is coming under increasing pressure. On the one hand, manufacturers and retailers are struggling to meet a sudden jump in demand. On the other, they may face new transport and distribution restrictions designed to stop the spread of the disease. While the European Commission has introduced measures, such as dedicated lanes, designed to keep good flowing between member states, food industry associations have reported delays at the boarder that impact fresh foods in particular. Labour shortages and forced factory shutdowns should be expected.

According to Bo Zhou, chief executive of A1 planning software provider FuturMaster, 'many' of the company's clients in Europe are 'worried about the impact on their supply chains'. The company counts the likes of Warburtons, Haribo, Bonduelle and Yoplait among its European customer base.

Covid-19: Prepare with forecasting and simulations

FuturMaster has operations in China, where 'huge' disruption was caused to businesses after the onset of the coronavirus crisis. Official data shows Chinese exports in January and February were down 17.2% year-on-year. For one of FuturMaster's beverage customers saw February sales plunge a massive 80%.

According to the tech company, there is still a 'lot of trepidation' around consumer demand - not least because new confirmed local transmission has started again after the full lockdown put a pause on the spread of the disease. The World Health Organization's latest status report reveals 103 new cases were confirmed in the country, all due to local transmission, on 23 March.

What are the key demand trends that FuturMaster has witnessed? Short-term demand from end-consumers has fallen sharply. Due to so many people being quarantined at home, the geographical distribution of demand has also changed. A lot of demand has shifted online. Understanding how demand is likely to evolve will be crucial if the food industry in Europe is going to meet the needs of citizens, Zhou believes.

"During times of such uncertainty, every company needs to make simulations on how demand may evolve and if and how they can satisfy this demand based on their production and warehouse capacity.

“You also need to closely monitor which transportation routes are cut, or how many workers will be unable to show up at various sites due to lockdown. For many companies in China, the problems were compounded because they don't have the technologies to support these simulations; so they were unable to anticipate demand and supply by looking at multiple scenarios," Zhou noted.

Grappling with food shortages and empty shelves

Panic buying - where many European supermarkets have worked to empty shelves due to stock-piling - is likely to test suppliers 'to the limit'. But spikes in demand are not the only problem food makers in Europe will face.

According to Zhou, sourcing materials may not be the biggest problem on the supply side. Companies will also have to contend with reduced production and warehousing capacities due to labour shortages. When one worker tests positive, the whole team has to be put into quarantine.

Moving products around can turn out to be an issue as well, especially when transportation routes are affected due to border closures. This has clearly been an issue in China. According to a recent McKinsey report, trucking capacity to ship goods from factories to ports is operating at around 60-80% of normal capacity in the country. This has resulted in goods facing delays of around 8-10 days.

"During the crisis, companies need to produce more with reduced resources. This is made possible by optimising the production by reducing set-up times. Manufacturers also need to produce more efficiently: having updated demand planning data allows you to produce only what is most in demand and profitable," Zhou said.

"Anticipating ahead - by doing simulations - enables companies to be better prepared. Being able to react in an agile and efficient way is vital for coping with any crisis situations. "

FuturMaster case study: A 'major' bottled water supplier in China

China consumes more bottled water than anywhere else in the world: around 25 billion

gallons a year, according to the IBWA trade association, which accounts for more than a

quarter of the world's volume.

One of the largest suppliers of bottled water to China - which did not want to be named - has been able to avoid 'severe' stock shortages using FuturMaster's 'sophisticated' supply chain

planning technology to help anticipate and respond quickly to the emergency, the tech group revealed.

The water company has 'numerous factories' it can leverage to adjust capacity based on forecasting of demand and market supply. It was also able to determine which products should be prioritised by taking into account stock on hand in each warehouse and available production and distribution capacities.The timing of the crisis was interesting. Most factories in China were already scheduled to close for a week over the Chinese New Year. At this time, coronavirus cases were threatening to bring Wuhan (where the Covid-19 virus outbreak started) to a standstill. A team of planners at the water supplier were already gearing up and preparing for various possible closures as news of new lockdowns spread. So it looked at the areas likely to be most affected and where else it could produce, and at what capacity. Using FuturMaster's system to make an updated plan for the supply network, the supply chain team tracked traffic restrictions and collected information from local managers to understand labour force trends. "It ran simulation after simulation. It came up with a plan A, B, C, and so on. This foresight and planning meant that it was less likely to be taken by surprise and resulted in continued supplies to almost everywhere."

FuturMaster's A1 allowed large amounts of data to be collected and interpreted, Zhou explained. Modelling different scenarios allows the company to come up with solutions - for

instance, shifting production capacity to different locations to cope with factory closures and transportation disruptions. Importantly, this was achieved at speed.

"In times of extreme uncertainty and volatility in demand, digital technology can certainly make

sense ofa multitude of data, quickly and optimally. This requires a supply chain planning too

that's highly flexible and data-driven. Ideally, you need to be able to manage as many variables as possible to get more accurate forecasts on demand and optimise the supply accordingly. It's

something that would normally take days to do manually. And a machine is often much better

than humans at crunching numbers and making decisions from wades of information. "

Managing disruption and re-thinking logistics

Zhou does not downplay the level of disruption coronavirus will bring to food and other businesses in Europe. "Everything that seems normal everyday becomes totally impossible," he stressed.

"For many businesses, you might need to find another logistics network. You have to focus on where's the best factory that you can produce in and look closely at costs and feasibility. All the normal variables that supply chain planners use on an everyday basis become uncertain and questionable. But you can act with foresight to mitigate risk.

"In times of panic - and against a backdrop of empty shelves - some digital technology can be used to avoid a crisis. Digital technology can help make better decisions afterwards and prioritise things whenever there's a choice to be made," added Zhou.

Answer 1

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Explain how the corona virus affect the supply chain in food industries starting from supplier, manufacturing and distribution.

There are growing studies about how the outbreak of Covid-19 affects supply chains and disruption of manufacturing operations around the world. Yet the worst thing still has to come. We predicted the peak in global supply chains of the Covid-19 effect in mid-March, forcing thousands of firms to throw down or shut down deployment and development plants in the US and Europe. The most vulnerable companies are businesses that use parts and materials extensively or exclusively from factories in China. Chinese production facilities have decreased their operation in the past month and are expected to remain depressed for months. Likewise significant, increased pressure to reduce the supply chain costs prompted businesses to adopt lean production, offshoring and outsourcing strategies. These cost-cutting steps mean that production will stop quickly due to a shortage of supplies if a supply chain interruption occurs. The vast majority of global businesses do not know what their threats to Asia are, since none have complete knowledge of the locations of all companies that supply parts to their direct suppliers. The delivery lead times are also going to have an effect. The sea transport, on average, takes 30 days to either the USA or Europe. This means that the last shipments will arrive in the last week of February as the Chinese factories stop manufacturing on 25 January before the Chinese vacation began. All of this indicates that the temporary shutdowns of assembly and development facilities are likely to escalate in the middle of March. In short, I believe that we need to concentrate on the worldwide growth. In two to three weeks it will start to hit hard and it will last for months.

Explain how the uncertainty in demand and supply is addressed in the article

Short-term market demand has decreased significantly. The regional distribution of demand has also shifted due to so many people being quarantined at home. There has been a increase in demand online. It will be necessary for the food industry in Europe to meet the needs of people and understand how demand is likely to evolve. Each business must model the creation and whether and how demand will be met, based on output and warehouse capacity, during periods of such uncertainty. Digital technologies will definitely make sense of a variety of data quickly and optimally in times of intense uncertainty and market instability. It also includes a very flexible and data-driven supply chain planning. To order to provide more detailed forecasts of requirements and adjust the supply accordingly, you preferably need to handle so many variables as possible. Normally, it would take days to do this manually. And sometimes a computer is far more numerous and dependent on the wades of information than humans.

Explain the solutions the article suggested to mitigate the uncertainties in the supply chain due to COVID-19.

As per the article,

You can have to consider a different logistics network for several businesses. You will focus on where the best plant can be built and closely analyze costs and viability. All the standard variables used on a regular basis by supply chain managers are uncertain and unclear. Nonetheless, you should take steps to reduce risk. Thankfully, new innovations for the supply chain are emerging that boost visibility across the entire supply chain and help the capacity of businesses to withstand these shocks. The conventional linear supply chain model is being transformed into digital supply networks (DSNs) that break down functional silos and link companies to their entire supply network so as to facilitate end-to-end visibility, collaboration, agility and optimization. DSNs have been developed to predict and address potential challenges by leveraging emerging technologies such as the Internet of Things, artificial intelligence, robotics and 5G. Regardless of whether the "black swan" case is like COVID-19, trade war, conflict or terror, regulatory reforms, labor dispute, unexpected market increases or bankruptcy, DSN-deploying organizations are prepared to address this inattentive.

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