Nobody really expected toilet paper to be the first thing to go. Food, sure, but toilet paper?
Even up to the present day the supply chain has struggled to cope with weird shortages. Some products are suddenly coming to the forefront as others recede — how many people could tell you what the acronym PPE stood for a couple of months ago? Now you’re probably doing very well if you manufacture gloves, masks or cleaners.
The novel coronavirus called COVID-19 has reshaped supply chains in the blink of an eye. We’ve covered the effects on Chinese suppliers closely and branched out as the pandemic spread, so we’ve seen how Wuhan’s outbreak affected industries like electronics and automotive.
But as the virus has made its way across the globe we’ve seen an extremely uncommon phenomenon: a truly global disruption to the supply chain.
What Global Disruption Means
COVID-19’s effects and the widespread shutdowns that are causing issues have stressed a supply chain ecosystem that wasn’t prepared for something of this magnitude.
Modern just-in-time inventory systems are designed to keep very little stock in reserve, allowing organizations at every level of the supply chain to save money that might otherwise be tied up in product that won’t move.
But the toilet paper example is an indicator of something different about COVID-19: the global supply chain isn’t necessarily prepared to respond to a global shortage. Regional disruptions allow stores and suppliers to adjust by moving inventory from other areas. Global disruptions don’t.
Toilet paper is an easy example because it’s not a high-margin item and it’s fairly simple to manufacture. Depending on your product, you could have dozens of components that need to be sourced from different areas — and if those components have a shortage you’ll be unable to fill the demand.
Supply chains are being disrupted for a variety of reasons:
- Demand massively increased. This happened with toilet paper, hand sanitizer and most PPE products.
- Factories are shut down or ports and borders are closed. This has been the case in good chunks of Wuhan and other areas of China for a while. One of the most high-profile closures, Foxconn, has recently reversed, and with the disease starting to die down this isn’t as much of a problem in China itself as it was before. But production in other areas may still be taking a hit.
- Contact people or methods have changed. Due to quarantines, closures and other issues regrettably including deaths factories may have shuffled their personnel. Contact methods may be different with so many people working from home too.
Your supply chain is dependent on a large number of links, and if any one of them fails you need to be able to take action immediately. You need reliable information.
Supply Chain Shortages and the Steps Being Taken
Hospitals and other essential services have had to find ways to get reliable supply chain data so they can safeguard themselves during the pandemic. Supply chain companies have been on top of this sort of monitoring for a while, particularly when it comes to medical equipment. Disaster divisions have been established for a while, but the difference with this one is the scale.
Companies like ESO and Premier are working with the federal government in the United States to track PPE orders and help with supply chains, but if you’re not dealing with PPE specifically information might be harder to come by.
Some other companies are stepping into the gap. One such free tool debuted recently, allowing anyone to check their supply chain against the company’s compliance data. It’s not a foolproof method, but it does help with forewarning for those who use some of the 500,000 major suppliers that are signed up with the service.
It also helps having close relationships with your suppliers all the way up and down the supply chain. You might know who your suppliers are, but do you know who their suppliers are? And do you know what their alternate options are?
During this crisis you should strive to get a better sense of who you’re dependent on, because in a crisis where people have to adjust their suppliers your chain might look more like a tree.
Take local Texas grocery store chain H-E-B, for example. They were able to adjust more rapidly to the COVID-19 crisis than some of their peers for a few reasons:
- They reached out to suppliers and peers in the affected areas. H-E-B already had a working relationship with those suppliers and others in the grocery business, so they were getting information as early as January.
- They had a network of alternate suppliers already established. H-E-B had already built relationships with local food distributors that they might not normally work with as much. For example Labatt, a food distributor that works mostly with institutions, was able to pivot a lot of their business to supplying H-E-B’s shortfall.
- They had a plan already in place. H-E-B is used to dealing with hurricanes and other natural disasters, so they already had disaster plans and experience. They also were on top of the health news and not reacting behind the curve like some other retailers.
H-E-B’s flexibility in the face of crisis was made possible because they’d built relationships, done their homework and thought creatively about where to source product. Don’t limit yourself; think outside the box like they did with the Labatt adjustment.
COVID-19 and Supply Chain Stress
It’s probably going to take a while for the global supply chain to recover from COVID-19. In the interim you’re going to have to get creative.
Make sure you know who your suppliers are at every step of the process, track global outbreaks and lockdowns and stay in contact with everyone involved in your production process. Stay agile and do your homework and you’ll make it through this crisis.