Supply Chain Lessons From COVID-19

The pandemic has caused “unprecedented supply chain disruptions with few industries spared,” the Institute for Supply Management said in April 2020. They based these claims on a late-March survey of primarily respondents based in the United States.

“The data suggests that even as companies adjust to supply disruptions — even anticipating normalizing supply conditions by the third quarter — they are expecting lower aggregate demand this year, which promises to be the most long-lasting impact of the virus outbreak,” said ISM chief executive officer Thomas W. Derry.

More than half of survey respondents (57%) reported that demand for their products was down on average 5%.

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Various Impacts Cause Widespread Disruption

By the end of first-quarter 2020, 95% of the surveyed organizations were experiencing supply chain disruptions. The ISM release said respondents reported these impacts as primary disruptors:

  • Longer lead times, which respondents reported were at least twice as long compared to normal for Asia, Europe and domestic suppliers.
  • Lower manufacturing capacity, with U.S. producers at 79% of normal, Chinese at 53% and European at 50%.
  • Less inventory to support current North American operations through year end: U.S. 71% of normal, Mexico/Canada 64%.
  • Tight talent market that respondents say could delay hiring in their organizations (54%) and reduce hours (33%), and that will reduce headcount (24%).

Adjusting Toward an Unknown New Normal

As ISM’s research indicates, the pandemic has caused widespread problems throughout the logistics landscape, rippling across the world’s commercial freight infrastructure and disrupting supply chains.

Logistics operations may never return to “normal,” but organizations show signs of settling down from the hectic days of cobbling together short-term solutions. Companies have found ways to ameliorate immediate impact and gain clarity for the near term.

“It is a prudent idea for companies to invest in the resilience of their supply chains,” Senthil Veeraraghavan, Wharton professor of operations, information and decisions, said on the Wharton Business Daily radio show. “Given that we are living in a global economy with a lot of people traveling all over the world, we’re going to have such public health crises — hopefully infrequently — for sure in the future.”

Build Sustainable Supply Chain Resilience

Here are steps that companies can take to bolster their supply chains and prepare for the next disruptive crisis, whatever it may be and whenever it may emerge.

Take proactive, agile action. Companies must actively prepare for random risk before it happens by:

  • Deciding what to do.
  • Investing in the solution up front before an event occurs.

Adapt and adjust as quickly as possible. Business and industry are constantly evolving, so your supply chain must respond to keep your business and your customers’ businesses viable.

Prioritize qualifying of new suppliers. Approach this as an ongoing function that the COVID-19 crisis has vividly highlighted.

Consider moving to local and regional sources. Bringing suppliers closer to production facilities can help stabilize inventory replacement.

Use technology systems designed for your industry. If available, deploy software developed specifically for your operational niche. Customizing generic software is time-consuming and expensive.

Stay up to date on tracking and location technology. Leverage barcodes, bokodes, QR codes, RFID tags and other automation capabilities that enforce tracking.

Consider your supply chain a communication channel. Just as resources move from point to point along your supply chain, so should your information flow among your partners and your employees.

Embed supply chain planning into overall strategy. A supply chain isn’t just an operational function; it’s like a circulatory system that keeps vital materials flowing to sustain productivity.

Monitor conditions in key locations. Supply chain disruption comes in many forms, from natural disasters to regulatory change. Watch for the signs and respond.

While the COVID-19 crisis presents significant challenges, proactive tactics will help ensure supply chain resilience and stakeholder well-being.

Learn more about Fitchburg State University’s MBA in Supply Chain Management online program.


Sources:

Institute for Supply Management: ISM’s Principles of Sustainability and Social Responsibility

Knowledge at Wharton: Coronavirus and Supply Chain Disruption: What Firms Can Learn

Wharton Executive Education: Faculty Profile – Senthil Veeraraghavan

PR Newswire: COVID-19 Global Supply Chain Disruptions Continue

Industry Week: Tackling Supply Chain Disruption During COVID-19

Delrecruiters: 10 Tips on How to Manage Your Supply Chain

McKinsey & Company: Could the Next Normal Emerge From Asia?

Bokode: Bokode Science

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