Latin America Shows Supply Chain Resilience In A Time Of Disruption

By Juan Cartier, Vice President & Head of Digital Supply Chain and Manufacturing Solutions at SAP Latin America & the Caribbean

I’ve lived in Latin America all my life, and throughout my career here I’ve spent a good amount of time focusing on issues in supply chain management. From my perspective, the most important factor that has helped companies in this region survive the coronavirus pandemic so far has been supply chain resiliency.

The experience here has been different from many other regions of the world. On the one hand, Latin America had the benefit of seeing the virus coming. We watched it spread across Europe and the United States before coming here – giving us some time to understand, anticipate, and prepare.

On the other hand, Latin America is made up of many different countries – all with different national responses to the crisis. Most have shut down their borders – significantly if not entirely – thus disrupting otherwise finely tuned supply chains. In response, companies have had to get creative. The medium for this creativity has been resilient supply chains.

What resilience means

I define supply chain resilience straightforwardly as the ability of supply chain participants to respond to change. For retailers in Latin America, as elsewhere, it all starts with the consumer.

By now it’s hardly news that consumer preferences have changed dramatically in response to Covid. Today, the focus is on vital commodities: things like food staples, sanitizers, and, of course, wine. Demand for luxury items has fallen precipitously. Buying habits have changed in obvious ways as well – with dramatic swings to e-commerce over physical retail outlets.

In response, retailers have needed to redistribute their assortments to meet the shift in consumer demand. For some, this has meant finding new sources of goods to stock their shelves. It has also meant moving to more online sales. And as retailers have started to reopen their physical stores, they have needed to introduce new Covid-compliant protocols and redirect floor traffic to ensure social distancing. 

As for manufacturers, border closures have required them to scramble to secure alternative sources of supply locally. In many cases, they have had to redesign products based on variations in the availability of raw materials. At the same time, they’re responding to new demand patterns as well. All of this has required manufacturers to constantly run new planning scenarios and simulations to best predict ultimate outcomes for customers and consumers.

The capabilities of resiliency

For successful companies navigating the Covid crisis, I’ve notice that those with capabilities for integrated business planning, flexible logistics, and e-commerce have done particularly well.

• Integrated business planning and the ability to run rapid simulations based on certain assumptions helps organizations game out planning scenarios and make wise business decisions. The “integrated” aspect of integrated business planning is important as well. With access to core business systems for ERP, for example, planners can collaborate more effectively based on a shared version of the truth across business units and supply chain partners.
• Flexible logistics and transportation have been critical, too. As demand spikes focus on certain areas – such as urban locations – organizations have needed the ability to marshal transportation resources and quickly re-direct carriers to meet the demand where it is. This is helping companies in Latin America to deliver positive customer experiences despite disruptions.
• E-commerce requires planning and collaboration up and down the supply chain. Demanding customers expect visibility every step of the way. And while volume often increases in ecommerce scenarios, logistics becomes more challenging. Instead of delivering in bulk to large retail outlets, now manufacturers need to deliver to the “market of one’ – getting goods to the front door of the individual who places the order.

Agility in action

I’ve seen a number of companies step up with positive results in response to the coronavirus pandemic here in Latin America. One company, a manufacturer of toilet paper – perhaps the symbol of a commodity in short supply – was in the planning stages of adding e-commerce capabilities. When the crisis hit, however, this company kicked this project into high gear and today is fully operational with an e-commerce solution. This kind of responsiveness is part of the reason why – in large part – Latin Americans have not seen the TP shortages that other parts of the world have seen.

Another example is a company that produces personal care products – such as creams and lotions. Typically, this company launches new products every three weeks – depending on a sophisticated regional and global supply chain to provide the raw materials that enable it to regularly innovate. In the face of new supply chain realities, this company quickly revisited it’s planning models, found new sources of materials locally, and redesigned its new products to accommodate what was available.

Numerous stories such as these exist in Latin America today. The point is that agility lies at the heart of supply chain resilience. Companies, in other words, need supply chains that bend but don’t break. This is at least one key for companies seeking to survive and thrive in the new coronavirus reality.

For a global view of supply chain resilience, see this paper from Oxford Economics: “Surviving and Thriving: How Supply Chain Leaders minimize risk and maximize opportunities”