Supply Chain Disruptions: Lessons from the Covid-19 Pandemic

Clarkson University David D. Reh School of Business, 11/12/20 19:00–20:00

Joshua LaFave, host. Speaker: Farzad Mahmoodi, Ph.D

Video Link: https://www.youtube.com/watch?v=ZE343UPCMmw

Mahmoodi, Farzad. “Supply Chain Disruptions: Lessons from the Covid-19 Pandemic.” Clarkson University David D. Reh School of Business, 12 November 2020, Online. Keynote Address.

Notes:

1) “Supply Chain Disruptions are Common”

  • Natural Disasters, IT Outages, Cyberattacks, Trade Policy Changes, etc..
  • Most frequent disruptions: Oil, Gas, Auto Manufactures
  • Longest Recovery time: Electronics, Aerospace

2) “Complexity of Global Supply Chain”

IndustryTier 1 SuppliersOverall Suppliers
Auto25018,000
Aerospace 20012,000
Technology 1257,000
Example: Most businesses will have thousands of suppliers

3) “Mitigation Strategies vs. Contingency Plans”

Mitigation Example: Hershey has 6 months of milk chocolate inventory

Contingency Plan: Walmart distributors have ~2 smaller centers nearby

4) “Supply Chains are more vulnerable than ever”

  • Efficiency introduces risk
    • Lean/Just-in-time systems
    • External Dependency/Outsourcing

5) How is COVID-19 Different?

  • Length of disruption is longer than expected and unknown
  • Various geographic areas impacted simultaneously across the globe
  • Disrupted supply and demand
    • Single positive case leads to a 1700% demand increase (Premier Inc, 2020)
    • Plus bullwhip effect
  • McKinsey & Company Survey (Q2, 2020):
    • 73% encountered supplier issues
    • 75% had transportation or distribution issues

6) Supply Chains were not Resilient

  • Trucking or Port Bottlenecks
  • Sick workers
  • Export bans
  • Panic-buying
  • Over-reliance of offshore manufacturing
  • Lack of transparency to assess existing supply
  • Poor coordination between Federal and State agencies

Resiliency is hard to measure!

7) Resulting Turmoil

  • China was sole source of many items
    • 80% of face masks are made in China
    • 80-90% of active pharmaceutical ingredients are made in China/India
  • Calls for reshoring industries

8) Appropriately Resilient Supply Chains

Find a balance between risk and resilience.

Low Risk High Risk
Low ResilienceAppropriately Resilient Vulnerable
High ResilienceUnprofitableAppropriately Resilient
Supply Chain Outcome based on Risk Balance

9) Recommended Strategies

  • Map/monitor supply chain networks
    • Identify Tier 1 and Tier 2 suppliers
  • Build redundancy into the supply chain
    • Strategic safety stock piles (the earlier in the chain, the cheaper they are to maintain)
  • Diversify supplier base
    • Global suppliers from multiple regions
  • Holistic Inventory View
  • Achieve Network Agility
    • Alternative manufacturing sites, etc…
  • Validate demand
    • Mitigate bullwhip effect (e.g. ordering 100 ventilators b/c you think they’ll send 10)
  • Use tech solutions
    • Clouds, 5G, Blockchain, AI, 3d printing
    • Advanced Analytics (P&G)
    • Component Database (Toyota)

10) Additional Recommendations:

  1. Government involvement to ensure resilient supply chains
  2. Better Fed/State agency coordination
  3. Better SNS transparency–not too early, but be ready to roll out information and supplies immediately when pandemic strikes
  4. Pandemics happen routinely (though far enough apart that people forget the last time or don’t think it will happen to them)
  5. Rethink resiliency at lower cost
  6. “Never let a good crisis go to waste” –Winston Churchill

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