COVID Effects on the Supply Chain

Stanley Griffis
Professor of Logistics and Business Administration, Department of Supply Chain Management, Broad College of Business, Michigan State University

This year has been unusual for supply chains around the world, and as a life-long supply chain logistics professional, I have watched with great curiosity the successes (keeping a population fed despite serious personnel constraints) and challenges (early experiences with PPE). While I am not a brand protection expert, I enjoy my interaction with the A-CAPP community, and I had a great time earlier this year speaking at the first A-CAPP “virtual event”, A Brand’s New World. During that event I spoke about some of the supply chain takeaways from COVID, and how those might affect brand protection and the supply chains responsible for protecting those brands and products.  

Thinking through where we are now a few months later, gives me further opportunity to reflect on the situation as it relates to supply chain from my 30 years of managing, and now studying supply chain. Specifically in the last 10 years, one of the focuses in my academic research has been on the ability of supply chains to be resilient to disruptions. Disruptions can take many forms, from severe weather events (e.g. hurricanes) to financial difficulties (e.g. 2008 recession) to late deliveries of vital inputs to your business process. Disruptions don’t even always arise from “bad” events. During COVID-19 we’ve seen paper products (paper towels and toilet paper) both disrupted by extremely high demand. As welcome as better than expected demand is, it still creates a disruption from a supply chain manager’s perspective as the balance between supply and demand so coveted in the field is thrown out of balance.

Companies make investment decisions all the time. Decisions regarding what facilities to open or close, which products to develop or abandon, and the resilience of the supply chain is one of those things affected by these investment decisions. From a brand protection perspective, how extended that supply chain is, or becomes, affects our ability to protect our IP. As an example, the further from “home” we operate, it becomes less likely the business norms for the two parties are as implicit and mutually understood, which necessitates extra time, energy and effort to create process and product visibility to keep that supply chain operating, as well as that IP protected.

As COVID has washed over the global economy, some of the weaker points in all our supply chains have been stressed, some even to the point of breaking. At the July A-CAPP virtual event, I observed that during normal business operations we’re usually averse to reorganizing our supply chains (swapping out suppliers, processes, manpower) because the philosophy of “if it ain’t broke, don’t fix” is commonly followed. However, as COVID has effected so many supply chains’ ability to operate, many are now finding themselves in a situation where their network is broken, possibly a lesser-performing supplier has gone out of business, so maybe now is the time to consider other structural changes as well. 

Some considerations:

  • Given upcoming shifts in demand (up or down) do you have your facilities in the right locales? 
  • If your supply chain is experiencing reduced demand, possibly now is the time to consider those internal process changes that when things are running at 95+% capacity you can’t risk. 
  • Now that portions of the offering you provide might be dropping, possibly this is the time to get creative and try something you might not risk in busier times. 
  • Similarly, portions of your business that are hotter than ever (such as cleaning chemicals, in-home delivery, etc….) you might not be able to perform to the demanded capacity without some changes.  Again, now might be the best time to get creative and consider alternate processes, bills of material, or network structures to help your business still achieve the desired performance from the customer, even though it’s well in excess of normal demand.

There is an analogy in the Lean and Six Sigma literature that a supply chain is like a river. The water in the river is analogous to either inventory, or human resources, depending upon the focus of the discussion, but that in normal times we have “ride” on enough of those resources (inventory and/or people) that a boat floating down the river clears any large rocks submerged under the water. If by design, or as a result of a supply chain disruption, the level of that river lowers (we have less inventory, or fewer human resources to perform needed jobs) then suddenly the rocks appear at the surface that we used to float over easily. Now steering the boat becomes vital, so more information is needed, to see ahead, and greater authority on the controls (rudder and keel) are required to skirt those rocks we’re unable to give a wider berth to. If we’re unsuccessful in seeing far enough ahead (upcoming increases in demand for instance) then when we get to that point in the river, rather than reliably banking our profits from sales, we find ourselves “on the rocks” (due to insufficient inventory), with upset customers, and negative impacts to the goodwill of our relationships. I would contend that COVID has brought us to a situation where the rocks have become more exposed, we can talk at some other point whether some of the rocks grew or the water lowered, the end result is, rocks! 

No matter the cause, it’s time to get creative. Consider this an opportunity to try some new things. If, as discussed earlier, business is down, then now is the time to try something new, because the operational impact of a small failure will hopefully still keep you operating well enough to handle the downturned business. If on the other side you’re in a boom cycle, then that creativity in operations may be necessary to even keep operating, and so again, go for it!