Shortages in products like Clorox wipes and other disinfectants may extend to at least May or June of 2021 because key pandemic-related raw materials that are used in both wipes and PPE (i.e., masks and medical gowns) continue to be in short supply because PPE demand continues to stay at unprecedentedly high levels, according to Gies Business faculty member Nehemiah Scott.
Scott is an assistant teaching professor of business administration at Gies College of Business and director of the College’s supply chain management program. He shared his perspective as part of the College’s COVID-19 Global Challenges in Business webinar series, which included topics such as insurance coverage, liquidity management, and cyber threats.
This session, “The Disruptive Impact of COVID-19 on Supply Chains,” distilled the strategic lessons that suppliers, manufacturers, distributors, logistics entities, and customers can learn from the COVID-19 crisis and offered advice on how to make investments going forward.
“Global supply chains were stress-tested in real-time during the pandemic,” said Scott, who explained the effects of the demand shock bullwhip effect and the lesser-known supply shock reverse bullwhip. Using hospital PPE masks as an example, he showed how unpredictable increases in customer demand and supplier material volatility – shaped by everything from increases in global COVID-19 infection rates to shut down factories in China to panic buying of face masks – made it extremely difficult to pinpoint how to get the supply chain back on course.
“Normally, higher demand creates higher visibility, meaning you have a better idea of what’s going on along the supply chain. But because demand was so high, it became unpredictable, extremely volatile, and extremely turbulent,” said Scott, who noted that some international transportation options were not just disrupted but displaced.
Scott outlined ways to calm the pandemic’s bullwhip effects and better prepare for future disruptions by prioritizing these strategic investments:
- Worker safety: Find ways to stress test your organization’s infectious disease response plans as you would do with response plans for other high-impact natural disasters, like a flood or a hurricane. Since pandemics are classified as low-probability events, organizations have little historical data related to them, making collaboration with public health and infectious disease experts very important to keeping workers safe.
- Stricter supplier onboarding: The supply chain disruption caused by COVID-19 created an environment susceptible to increased counterfeit product production and distribution. To help combat this, strengthen supplier evaluation protocols, review materials receiving processes, and seek tighter security control in free trade zones, where a large extent of counterfeit activity takes place.
- Strong relationships: Strategic and mutually beneficial relationships have never been more important. During the pandemic, some companies have even set new records in the number of long-term contracts signed with new customers. Instead of invoking force majeure contract clauses as a first reaction to supply chain disruption challenges, seek instead to invest in stronger relationships with key suppliers, customers, and logistics partners.
- Redundancies: Create redundancy to ensure excess capacity and to help balance efficiency and flexibility. This means diversifying your supply base by geography and number of suppliers. In addition, seek out value-adding unconventional relationships, like those between the automobile industry and PPE manufacturers that helped create PPE and ventilators.
- Supply chain mapping: Resist the traditional notion that supply chain mapping is only about your suppliers. Instead, use technology and tools to better identify and understand both supply- and demand-side partners.
Scott believes the COVID-19 crisis will lead to a large investment in technology as companies turn to data analytics to predict future disruptions.
“It remains an extremely tumultuous time. By looking at infection rates and positivity rate data, companies can better manage worker safety as well as supply and demand. Technology can help to identify where to create more global geographic redundancies while planning for local resources that bring products closer to the consumer,” Scott said.
Scott is teaching a free MOOC course, Managing Supply Chain Disruption During COVID-19 for those seeking to learn more about these strategies. With this online course, learners may reset deadlines to meet their schedules and earn a certificate upon completion.