The Digital Supply Chain podcast

Consumer behaviour shifts in the age of coronavirus, and its effects on supply chains - a chat with Richard Howells

July 28, 2020 Tom Raftery Season 1 Episode 57
The Digital Supply Chain podcast
Consumer behaviour shifts in the age of coronavirus, and its effects on supply chains - a chat with Richard Howells
Chapters
The Digital Supply Chain podcast
Consumer behaviour shifts in the age of coronavirus, and its effects on supply chains - a chat with Richard Howells
Jul 28, 2020 Season 1 Episode 57
Tom Raftery

I was chatting with Richard Howells (@HowellsRichard on Twitter) recently on the topic of how the current coronavirus pandemic is affecting consumer behaviour, and how this is having huge knock-on implications for supply chains.

Richard, who leads thought leadership for supply chain at SAP, said that this would make for a great topic for the podcast, so I said "let's do it!" and lo, here we are.

We had a wide ranging conversation covering everything from how manufacturing and distribution are being affected, long term price implications for consumers of some of these changes, and what post covid supply chains will look like.

We had fun putting this podcast together, I hope you enjoy listening to it. If you have any comments/suggestions or questions for the podcast - feel free to leave me a voice message over on my SpeakPipe page or just send it to me as a direct message on Twitter/LinkedIn. Audio messages will get played (unless you specifically ask me not to).

To learn more about how supply chain leaders improve end-to-end supply chain visibility, download the research study of 1,000 COO’s and Chief Supply Chain Officers – “Surviving and Thriving How Supply Chain Leaders minimize risk and maximize opportunities

And if you want to know more about any of SAP's Digital Supply Chain solutions, head on over to www.sap.com/digitalsupplychain and if you liked this show, please don't forget to rate and/or review it. It makes a big difference to help new people discover it. Thanks.

And remember, stay healthy, stay safe, stay sane!

Show Notes Transcript

I was chatting with Richard Howells (@HowellsRichard on Twitter) recently on the topic of how the current coronavirus pandemic is affecting consumer behaviour, and how this is having huge knock-on implications for supply chains.

Richard, who leads thought leadership for supply chain at SAP, said that this would make for a great topic for the podcast, so I said "let's do it!" and lo, here we are.

We had a wide ranging conversation covering everything from how manufacturing and distribution are being affected, long term price implications for consumers of some of these changes, and what post covid supply chains will look like.

We had fun putting this podcast together, I hope you enjoy listening to it. If you have any comments/suggestions or questions for the podcast - feel free to leave me a voice message over on my SpeakPipe page or just send it to me as a direct message on Twitter/LinkedIn. Audio messages will get played (unless you specifically ask me not to).

To learn more about how supply chain leaders improve end-to-end supply chain visibility, download the research study of 1,000 COO’s and Chief Supply Chain Officers – “Surviving and Thriving How Supply Chain Leaders minimize risk and maximize opportunities

And if you want to know more about any of SAP's Digital Supply Chain solutions, head on over to www.sap.com/digitalsupplychain and if you liked this show, please don't forget to rate and/or review it. It makes a big difference to help new people discover it. Thanks.

And remember, stay healthy, stay safe, stay sane!

Richard Howells: [00:00:04] This pandemic has has had a long term impact on how we will change the way that we do business, the way that we run our supply chains, and that the amount of risk we're prepared to take as a as a as a business. [00:00:17][13.1]

Tom Raftery: [00:00:20] Good morning, good afternoon or good evening wherever you are in the world. This is the Digital Supply Chain podcast. The number one podcast focussing on the digitisation of supply chain. And I'm your host. Global vice president of SAP, Tom Raftery. Hi, everyone. Welcome to the Digital Supply-Chain podcast. My name is Tom Raftery with SAP and with me in the show today I. Welcome back. Richard would Richard, welcome back to the show. Introduce yourself, please. These for people who haven't heard you before. [00:00:47][26.6]

Richard Howells: [00:00:48] Sure thing. Tom, thanks. Thanks for inviting me back. I don't usually get invited back a second time for anything. My name's Richard Howells. I work in the supply chain team at SAP and I focus on thought leadership around at all things, supply chain excellence. [00:01:06][18.0]

Tom Raftery: [00:01:06] Now, we had a chat before before starting the podcast. And, you know, we were going to have this podcast talk about changing consumer behaviours and buying habits as a result of the pandemic. So do you wanna talk a little bit about that? Because there has been huge shifts in consumer behaviour, hasn't there? [00:01:26][20.1]

Richard Howells: [00:01:27] Absolutely. I mean, post a pre pandemic, we were talking a lot about the whole experience, economy being customer centric and providing individualised products, real time delivery. And that has been turned on its head in the last few months. I mean, customer centricity is still important, but I'm more concerned about making sure that I get a delivery slot rather than next day delivery individualised products. It's just. Do they have the products that they need? So everything has changed and people are still focussed around customer centricity. But how I buy things has changed. I now both buy things online. Probably 90 percent of the goods that I buy now are delivered to me, to my doorstep. I'm excited for the time when I can go to the store without a mask on and go shopping again. And I never thought I would say that. They hate going shopping. Everyone is ordering online. Different generations. You get that the older generation are now embracing the whole e-commerce scenario. And I think that will continue moving forward because you realise that this is easy. I just order something in a few days later, it turns up. I don't have to go out of the house. I don't have to go anywhere. I don't have to be in the crowds. So I think e-commerce is as increased is probably gone forward six years in six months. [00:02:55][87.5]

Tom Raftery: [00:02:55] It's incredible. Yeah. On the other hand, to your point about actually going out, looking forward to going back to shops. I think a lot of older people maybe consider going out shopping a kind of a social thing. And now that's all been turned on its head. And now it's not safe for them to quote. And now they do have to do it online. [00:03:17][21.7]

Richard Howells: [00:03:18] Absolutely. I mean, it's not just shopping on online. Social interaction is now online as well. I mean, everyone. Zoom is now part of everyone's vocabulary. Everyone is using online. Face time, tools or digital tools to communicate with friends and family. It's rarely changed how people leverage technology leverages technology. [00:03:41][22.7]

Tom Raftery: [00:03:42] I was I was reading an article. I think it was earlier this year before the pandemic. It was back in February about a company in Ireland called Manna Aero and Manna Aero are a drone company. And they got licenced by the Civil Aviation Authority in Ireland to do deliveries for a restaurant chain called Camile Thai. And so you could open up the Camile Thai application on your phone, you could order the food, and then you had a choice of either human delivery or drawn delivery. And if you chose drone delivery, a Google street map of your street popped up and you put down a little pin where you wanted the drone to deliver the meal. And I thought, yeah, that's really cool. It's a nice way of doing it. And then I saw during the pandemic that Manna Aero had no been licenced, not just to do that, but actually to deliver groceries and medicines to people, to vulnerable people, particularly in the west of Ireland, who were it were in self isolation. [00:04:47][65.1]

Richard Howells: [00:04:49] I saw one example on on the news this week about a school library delivering schoolbooks to the children and they won't get really excited, forgetting, first of all, it came by drones so they could reach their friends about getting a drone delivery. And it made them more excited to read the book as well. [00:05:05][15.8]

Tom Raftery: [00:05:06] Fantastic. Fantastic. What other what other changes are we seeing? [00:05:10][4.0]

Richard Howells: [00:05:11] Well, it's really changing the way that we have to as businesses serve these customers. I mean, you were talking about drone delivery and that last mile delivery now is critical. I mean, you look out of your window when you see so many delivery vehicles just delivering that that online order everyday. We're getting a delivery here with every other day before the pandemic. But now it's every day that we're getting a delivery at my house. You know, we're so so having a different channel and a different distribution network to serve your customers has become critical. And that mean meant that businesses have to rethink how they packaged the goods, how they deliver the goods. So it's a completely new business model. And anyone that doesn't have that direct to consumer model as one of their channels now is is really hurting. I mean, if they're even in business, we're seeing pop up warehouses. And the concept of the of a pop up warehouse where businesses are putting their warehouses closer to the demand so that they're staging a temporary warehouse, or it could become a permanent warehouse so that they can better serve and be more responsive to get the goods to that customers. The big retailers have had this option for a long time. Where are they? Because they can use their stores. Sure. As a as a distribution centre as well. And if they weren't before, they're certainly doing that now, where there are more warehouses than ever around the US, where whether it's part of a of a retail store or, as I say, one of these pop up warehouses that storing for the short term to serve that customer needs, kind of analogous to that is restaurants, because, well, in the first instance, a lot of restaurants are now doing home deliveries, but also restaurants here. [00:07:03][112.1]

Tom Raftery: [00:07:04] I'm not sure about there, but restaurants here have very strict guidelines on social distancing between tables. So restaurants particularly have outdoor spaces that have tables out of doors. And they're going to do far better if you are a restaurant in Spain, at least, that only has an indoor space. You can only have doubt. I don't know what is it like 25 percent or 30 percent full, whereas the outside can be 50 to 70 percent full. So, you know, it makes a huge difference as well for for for restaurants if they have the outdoor space. [00:07:39][35.2]

Richard Howells: [00:07:40] Absolutely. I live in the Boston area, and that's working fine in the summer of November or December. [00:07:47][7.1]

Tom Raftery: [00:07:54] The planning has planning been affected? [00:07:57][3.9]

Richard Howells: [00:07:58] Yes, I mean, it's all the way through the process. I mean, we're seeing businesses who used to do monthly sales and operations planning processes moving to weekly processes because they have to make decisions faster and react to changing demand and uncertain supply. The ones that were doing weekly planning cycles are even going down to daily planning cycles. The whole concept of being able to do simulations of planning so that you can do what if analysis, what if this if I have less capacity in my manufacturing facility, can I add an extra shift to set to take into account the spacing and social distancing? What if the demand is going to spike for this product completely dropped for this product? What if I'm getting orders now at the at the at the individual consumer level, rather than sell sending bulk shipments to a a university or a hotel? So the demand is still there, but the whole planning scenarios of how you have to satisfy that demand is different because you're getting orders from different places, different levels of a different size orders and at a higher volume of orders. Because if a retailer is buying it, you get the order once, but it might be 50 different consumers ordering the same quantity of goods. So you have to be able to simulate how to satisfy that, how to pack that, how to plan that, and also how to position that inventory. I talked about pop up pop up warehouses, but inventory optimisation becomes critical then of where I store the finished products, but also where I store intermediate so that I can so they can pack them to order, for example, or pack them differently to how I used to pack them, because I am now dealing with different customers. I'm dealing with individuals rather than businesses from an audit taking perspective and then that has a knock on effect of the manufacturing processes. Now you have to have more flexible manufacturing. You have to be able to pack things differently. And also from a safety standpoint. Manufacturing has been hit. The manufacturing sites have been hit very hard because particularly the food industry, high volumes of people particularly. [00:10:10][131.6]

Tom Raftery: [00:10:11] We've seen a lot of food production sites, the kind of meat packing plants and places like that where there's been outbreaks in the U.S. and in Germany and places as well here in Spain. And, you know, it's gotta be really tough for them because the lines there are designed for, you know, people being proximate and now they can't be. So this is a thing I brought up on the podcast, you know, several times before. What what choices do they have? I mean, you said maybe they put on an extra shift, but a lot of these places are going, you know, 24/7 anyway, so you can't go 48 seven. So how do they fix that? You know, and particularly if they have to social distance, then they they can stand up a new line generally because they don't have the space, because they're all maxed out on that. So the only way is to increase automation. You have to think and that's something that, you know, is hard to do and in a lot of manufacturing places. [00:11:12][61.4]

Richard Howells: [00:11:13] Exactly. I mean, we we're seeing that those outbreaks are then affecting the company's brand. And you've got to be able to respond both ethically to take care of your of your employees, but also from a brand awareness standpoint as well. I mean, the whole social distancing of everyone being six foot apart in a meat processing plant where they usually shoulder to shoulder is is is completely alien. You're seeing now the extra cost involved of providing that safety, whether it's through speciality equipment, whether it's through perspex dividers, more more hands sanitising, more cleaning down of the equipment, which takes time separating the shifts completely so that there's a longer changeover between shifts to clean down the equipment, but also no swapping of personnel between shifts. I'll swap with you because I want to I want to take the day off, but I work tonight instead of you. You can't do that anymore because they're in different bubbles. Right? Of of shifts that that can't commingle. So it's all affecting the the human aspect of it. And you mentioned the automation. I mean, yes, it if you had automated lines, then you wouldn't have this human issue. But you can't automate all of your lines. You can't do it tomorrow either because it's a capital expense. There's a lot of time and money involved. What we're seeing is companies leveraging intelligence and technology to augment the workers so that the people that are allowed on that floor, they have more access to information. They get better. They get decision, support, having decision to sort support. And on some level of automation, to augment the humans and to increase the productivity of the individuals and the lines that are there is really the short term opportunities. [00:13:04][110.8]

Tom Raftery: [00:13:05] Something something I've been wondering about is you brought up the point yourself. Just there is, you know, the fact that you have these longer changeover times and the increased amount of sanitation or sanitising that has to be done. We were talking specifically there about the meatpacking plants, for example. But this applies to everything. I mean, I go to my barber now and, you know, a book online, a slot, and I make sure in my case, I make sure to book it at nine, 30 in the morning when he opens. So I'm the first to there, you know, and they take in three people at a time and they're in separate rooms. And then the place is sanitised after each person, before the next person is allowed in. So that means that they're spending more time doing fewer people, using more resources like sanitising products that they never had to use before, using disposable kind of towels and things like that. Or coverings. All this means increased costs, fewer haircuts done in the case of barbers, fewer meat produced in the case of meatpacking plants. And to your point, that means an increase in costs. So far, a lot of those increased costs haven't been passed on, but they have to be done at some point. [00:14:25][79.5]

Richard Howells: [00:14:25] You would say that the cost of everything will go up, the cost per haircut for the company, for the individual barbers or businesses to make money. You can't you can't make money with reduced volumes and increased exactly those reduced volumes unless you increase the cost themselves. And it's it's it's amazing to me that it's that the costs of everyday goods hasn't increased dramatically. They may have seen some increase, but probably not at the level that you would have to do for the companies to be making the same profits that they were before. And you have to appreciate that as a consumer that that many of these businesses are doing what's right for the consumer. In many cases, they. [00:15:08][42.7]

Tom Raftery: [00:15:09] Is that sustainable? [00:15:10][0.3]

Richard Howells: [00:15:13] Not without lots and lots of money coming from governments to subsidise things. Or from somewhere to subsidise things. And no, it's not sustainable in the long run. I mean, the reality is in the long term, we have to get a vaccine and lots of our customers are looking for and and researching vaccines at the moment. And that's the. Long term, that is the answer is you have to find a way that we can go back to. The new normal, the new abnormal. Somebody said on one of your business as abnormal. [00:15:42][28.5]

Tom Raftery: [00:15:46] And where where to from here? I mean, you know, to that point? [00:15:49][3.2]

Richard Howells: [00:15:51] Well, first of all, I think every many companies or most companies are doing a great job of protecting their their employees in this environment and getting back to work as much as they can. But as until we have that vaccine, I don't think we're going to get back to that point of normality. But I think as we move forward, I mean, we need to remember some of the lessons that we've learnt to be around, do we, about that customers interest centricity concept. And as a consumer, do I really need it delivered to me in the next six hours? Do I really need it totally personalised? And I think that some of that will. We'll go back to to what happened before. But I also think that it's it's made us more understanding as as as humans around our environment and what's going on. So I think moving forward, I think, believe it or not, sustainability will have a positive ramifications of this virus. We've seen it in the short term impacts of sustainability on less manufacturing and less pollution. Just out of necessity because things have shut down. And we're seeing the bottom of the canals in Venice. We're seeing the Himalayan mountains from cities in India that haven't seen it in 30 years. And I think that as we look to change our manufacturing processes and be more resilient, I think we'll be taking less risks and have less of a global supply chain than we've had before or having alternative approaches, alternative sourcing strategies. I'm not going to get all of my raw materials from this one location because it's the cheapest, because if there is a problem in the supply chain, all of my eggs in one basket, I need to be able to have alternative sourcing strategies of where I get my inventory from, whether it's from different companies or different. Read the same company but different regions of the world to reduce that risk. I think companies will start looking at their manufacturing processes and where they were offshoring to completely reduce the costs. They'll look at different strategies for for either near shoring or on shoring key products or keep percentages of the of the products that they manufacture to ensure that they have the inventory and the ability to continue manufacturing. In case there is a shut down of the supply chain in one way, shape or form. I mean, we've had these before and with and we've sort of three weeks later, we're back to normal. But I think this this pandemic has has had a long term impact on how we will change the way that we do business, the way that we burn our supply chains, and that the the amount of risk we're prepared to take as a as a as a business. [00:18:43][172.2]

Tom Raftery: [00:18:44] Yes, it strikes me that supply chains of ALD were as linear as possible. And now we've got to go to a more complex, almost web structure of supply chains so that we have multiple suppliers and multiple distribution centres and things of that sort. It becomes far more complex to manage. How do you deal with all that? [00:19:06][22.5]

Richard Howells: [00:19:07] I think many companies were were very much just in time and very lean, and now they're going to be just in case, having a bit more security around the that comfort level of being able to satisfy it. But handling that complexity is is going down to digitisation, I believe. I mean, I worked for a software company. I am bound to say software. [00:19:28][20.5]

Tom Raftery: [00:19:29] And when you've got a you've got a hammer. Everything looks like a nail. Is it? That's right. [00:19:34][5.2]

Richard Howells: [00:19:35] They don't solve all your problems. You've got to have the right business processes in place. You've got to have the right strategies in place and then leverage the technologies to support those those strategies and and support those business practises. So having you having your risk mitigation strategies in place, having your sourcing strategies in place, having your inventory optimisation strategies in place, and then leveraging the digitisation of the data and the supply chain to actually take into account those strategies, those processes, and run your business based on that and be able to adjust them over time as things change and having the tools that are flexible enough to react to those changes. So having a resilient supply chain, but also the business processes and business systems that can be resilient. [00:20:21][46.5]

Tom Raftery: [00:20:22] Also an agile man. Yeah. Cool. Richard, that's been great. We are coming up towards the 20 minute mark. So is there anything that I haven't asked you that you think I should have? Anything that we've not touched on, that you think that's important for people to? [00:20:37][15.6]

Richard Howells: [00:20:37] Be aware of the one area that I didn't touch on is the importance of having these your maintenance strategies in place for the equipment as well. We talked about having limited capacity of of people, but the capacity constraints of equipment is also critical and making sure that when the people are there, those machines are working and running as as intended. And I think, again, digitisation becomes important there of having the ability to to drive predictive maintenance strategies to ensure that you fix machines before they break down. You said you fix equipment for they break down, not fix it when they break down, because they usually break down when they're being used. If you can just when you want the place besides locking them because it's trending to break down. So at the next shift changeover IoT maintain it now then then it's better utilising the equipment, the assets and the people. [00:21:33][55.4]

Tom Raftery: [00:21:33] Very good. Pretty good. Richard, if people want to know more about consumer be changing consumer behaviour or about supply chain or about Richard, where would you have me direct them? [00:21:45][11.8]

Richard Howells: [00:21:46] You can find me on Twitter and on LinkedIn, and I'm sure we can share the my my LinkedIn address and Twitter handle on the shirt notes. Correct. You can always get information from SAP dot com. And specifically, the supply chain area within SAP dot com. And I write a lot on SAP BrandVoice on Forbes, so if you want to read some of the articles that I've written on this topic and others, just do a search for Richard Howells Forbes. [00:22:18][31.7]

Tom Raftery: [00:22:20] Richard, that's been great. Thanks again for coming on the show today. No problem. Thank you. It's a pleasure. OK, we've come to the end of the show. Thanks, everyone, for listening. If you'd like to know more about digital supply chains. Head on over to SJP dot com, slash digital supply chain or simply drop me an email to Tom Dot Raftery at SAP dot com if you'd like to show. Please don't forget to subscribe to it. And your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks. Catch you all next time. [00:22:20][0.0]

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