Chad Autry didn’t suffer any shortage of shop talk when the coronavirus pandemic forced many to work from home. The parlance of his profession was already there. It was everywhere.
“I’ve never heard the words ‘supply chain’ uttered so much by government officials and major media outlets as I have in the past two weeks,” says Autry, the FedEx-endowed professor of supply chains at the University of Tennessee in Knoxville.
He and other supply-chain researchers are watching in awe as global networks that move goods get knocked out of balance, creating disruptions along the channels between producers and consumers. They usually run in synchronous bliss without anyone ever noticing. Until something goes wrong.
For now, most supply chains “are chugging along just fine, and because we’ve all been forced indoors, many have surplus inventory,” Autry says. The headline-grabbing few that aren’t -- bathroom tissue, anti-bacterial soap, certain food products -- sold out because of “severe demand shocks that forecasters simply couldn’t have predicted,” he says.
In the science of supply chains, risks are modeled and prepared for -- but few companies would’ve had contingencies for a pandemic that’s doing this much economic damage. The academic experts see some tough days and more disruptions ahead, but ultimately a system that’s resilient and adaptable.
Here are some more observations from academics who responded to Bloomberg’s questions about where we’re headed:
Future Models
“In the future, a global pandemic of this magnitude will not only be a foreseeable event, but will likely change how we model unknown unknowns. And depending on how likely similar pandemics are expected to be in the future, a whole slew of mitigation and contingency measures are likely to be considered,” said Sergio Chayet, director of the supply-chain management master’s program at Washington University.
“This crisis will bring new focus to the people aspects of supply chains, specifically the human resources responsible for making them run. There is a new appreciation for retail-store employees, factory workers, and workers in logistics and transportation, energy, health care, education, and other industries responsible for sustaining life during shutdowns.”
“Just like Sept. 11 brought permanent changes to airport and port security, it is likely this latest crisis will bring permanent changes to operations and supply chain risk management as it pertains to mitigating worker health risks and establishing contingency plans to protect them.”
Multiple Options
“The biggest lesson we can learn is the benefit of multiple options at every stage of the supply chain,” said Sunil Chopra, a professor of operations management at the Kellogg School of Management at Northwestern University.
“Business leaders are likely to be more receptive to the suggestions which typically call for up-front investment (that may marginally reduce efficiency) for long-term gain. In general, given the overall short-term focus, business leaders have not been very receptive to this message over the last few years.”
“This will be a huge shock in economic terms. As long as governments and central banks are willing to spend what it takes to avoid complete collapse, the supply chains should rebound. A great example is the food supply chain in Italy which has continued to function remarkably well despite what is the most difficult set of circumstances in the world.”
Local Solutions
“There will be some difficult days ahead, but overall, production and distribution supply chains in the developed countries will be able to meet the challenge.” said Morris Cohen, a professor of manufacturing and logistics at the Wharton School at the University of Pennsylvania.
“The question of global sourcing will continue to be critical. I believe that there will be a shift towards more regional and local solutions, with less dependence on single sources in other countries, as companies determine that the costs and risks of off-shoring are even more significant than what they perceived them to be in the past. However, I predict that the underlying structure of a global supply chains that exists today, will persist.”
Modeling for Unknowns
“What’s happening right now is an eye-opener for researchers and practitioners of supply-chain management,” said Sang Kim, a professor of operations management at the Yale School of Management. “Most supply chains are designed and optimized to bring efficiency and be responsive to customer demands in relatively stable conditions. Well-prepared firms have risk-mitigation strategies in place and be able to ride out disruptions without significant long-term damage.”
“However what we have in front is different, as we are experiencing a once-in-a-lifetime event that forces us to reexamine many of the assumptions that guided decades of supply-chain management practices: many firms were prepared for two-week supply disruptions from China, but no one was prepared for two-month shutdown of the entire country.”
“In the future a global pandemic of this magnitude will not only be a foreseeable event, but will likely change how we model unknown unknowns. And depending on how likely similar pandemics are expected to be in the future, a whole slew of mitigation and contingency measures are likely to be considered.”
Synchronization Issues
“The magnitude of logistics challenges we are currently and will be facing for the foreseeable future are unprecedented in my lifetime,” said Michael Knemeyer, a professor of logistics at the Fisher College of Business at Ohio State University.
“Companies have become much better at managing risk events over the years, but they typically focus on issues that affect only parts of their broader supply chain. They focus on developing contingency strategies on how to quickly address the particular nodes, links or geographies that are affected.”“The current situation is different in that it is having widespread effects across multiple industries, multiple geographies, and multiple tiers of the supply chain. In addition, it is causing huge levels of uncertainty in both supply and demand. It is synchronizing the supply and demand that is going to continue to cause problems for companies.”
Rethink Priorities
“For now, the demand on the health sector is disproportionately high so production and service capacity need to be mobilized to serve that sector so that it can keep up,” said Nicholas Petruzzi, a professor of supply-chain management at Penn State University’s Smeal College of Business.
“At the same time, measures need to be taken to reduce the demand on that sector. Once health sector supply and demand is rebalanced, demand can once again shift to other needs and desires (beyond health care) and production chains can rebalance to those needs and desires accordingly.”
“The world is going to be a different place on the back end of all of this. I think once-in-a-century events such as this inevitably force us to rethink our priorities and preferences, on the one hand, and to push the limits of our resourcefulness and capabilities, on the other hand. This undoubtedly will lead us to new equilibria when it comes to the goods and services demanded and, hence, provided in the nearer term post-pandemic future.”
Eliminating Frictions
“We need more responsive and agile supply chains by eliminating barriers and frictions in the chains. The key is to figure out strategies that shorten lead times so demand and supply can better match,” said Kevin Shang, a professor of operations management at Duke University’s Fuqua School of Business.
“In current global supply chains, the “profit-driven” objective has made supply chain longer (e.g., outsourcing from low-cost countries). Trade wars have also created new barriers, making the supply chain less responsive. The shortage of medical supplies in New York is a good example of outcomes resulted from sluggish supply chains. The government should reduce the barrier to allow better distributions of critical supplies between countries.”
By Brendan Murray
