1
1
By Karen-Janine Cohen
Prior to the start of the COVID-19 pandemic, supply chain details were of interest mostly to logistics experts and business academics. Yet in 2020, stories about consumer shortages and disruption in manufacturing and shipping brought public attention to how goods travel from makers to homes, and what happens when there's a problem somewhere in the chain.
Today, businesses are already integrating the lessons of the pandemic when they plan for supply chains going forward. Yet experts say there are more factors they should consider: a new business and geopolitical climate, the need to change long-standing practices to create stronger and more resourceful supply chains, and groundbreaking accelerations in technology, all of which could change how goods move around the world for decades to come.
"The expectation is to get things faster," said Gregory Maloney, director of the FIU Business Master of Science in Logistics and Supply Chain Management program and associate teaching professor of marketing and logistics. On the consumer level, even as toilet paper became hard to find, goods arrived at people's doorsteps in record speed. It's an expectation borne of the pandemic and one that will outlast it, said Maloney.
L. Craig Austin, an assistant teaching professor of marketing and logistics, noted that while some firms were caught off guard, others were agile enough to respond strategically. Priorities for creating a resilient business supply chain include developing a reliable, trusted and diversified supply network; becoming nimble in shifting options; and using technology to instantly know the location of parts and products.
Many best practices from pre-pandemic times form a blueprint for going forward. That begins with a company vetting multiple vendors for cost and reliability. In that way, the pandemic created a shift in thinking, said Ivan Gantar (BBA '02), vice president and head of the Key Account Program Office for North America at logistics firm Kuehne+Nagel.
"The name of the game was always lean inventory, just in time, and that's how successful companies were managed." That works fine, Gantar said, "as long as there isn't a 'black swan' event" – such as the shutdown of China.
"We need to think of inventory as 'just in case' as well as 'just in time,'" he said.
Sebastian Garcia-Dastugue, an assistant professor of marketing and logistics, noted the advantages and challenges of keeping inventory. Speaking to the reluctance to maintain inventory, he noted, "businesses aim for efficiency; they don't want the cost of keeping inventory levels higher than needed to support the ongoing operation." But at the same time, he said, "the purpose of the supply chain organization can't be just reducing cost; sometimes, strategic investment in inventory and other reactive resources serve to mitigate risks."
Whether it's materials or logistics services, Gantar said, "don't rely on one supplier, and don't just rely on the cheapest." He recommends one or two strategic partners, and one or two "just in case" firms as backup.
Being able to quickly shift direction is the second key to weathering disruptions, Austin noted. "Agility is part of resilience," he said, which means understanding both your competitive environment and your willingness to quickly change direction. "Consumer demand across a range of items has significantly increased, so supply chains are under intense pressures, but are responding and transforming themselves to the new realities," he said.
Companies also must evaluate and vet their logistics providers with rigor similar to that which they apply to examining their suppliers. "You have to assess the value, reliability and the cost," Austin said.
Not every company action must be expensive or irrevocable, said Garcia-Dastugue, who noted that bringing risk management into the supply chain practice can be relatively inexpensive, even for small- and medium-sized businesses.
"Risk management tools are one of the safest [investments] a company can make," he said, noting, "you have to understand the relationship between the supply risk you have and the customer risk you have." In many companies, 20% or more of the customer base might account for up to 80% of sales. He recommends a traffic light method of staying current on the supply chain process. "Green means go, yellow, keep an eye on things, and red, manage to the smallest possible detail."
All companies, big or small, must use software and digitization to better understand their internal operations. Digital technology needs to run across the entire supply chain, including suppliers, logistics carriers and retailers. The data gathered from technology-based transparency lets companies better understand their business, which undergirds resiliency.
"If your system can talk to their systems," Austin said, "you are then able to share data."
Ha Ta, an assistant professor of marketing and logistics, said that technology supports the growing role of transparency, as embedded sensors on parts, packages and equipment allow for nearly seamless information sharing across companies in a supply chain.
"This lets companies know exactly where their goods are, from manufacturing to transit, all the way to the warehouse and then to the consumer, or when their inventory is low," she said. Blockchain, the distributed information sharing system most associated with bitcoin, is now being used by big firms, such as Walmart and Unilever, and carriers like Maersk, for information sharing, "so that every member receives the same information at the same time with confidence and trust in the information," Ta added.
Technology is changing almost every facet of warehouse operations. Gantar noted that technologies such as augmented reality could facilitate remote decision-making, bringing another set of managerial "eyes" informed by data analytics into a warehouse as that manager sits thousands of miles away. Companies should also be looking at artificial intelligence, Ta added: "AI-powered machine vision inspections, such as those used by Amazon and DHL, could help reduce error rates and unload a trailer in only 30 minutes, compared to hours without the system."
With all the new technological bells and whistles, having the right manpower combined with a well-designed process is increasingly important. "You need to have the people who understand the technology and see the big picture, and have processes established to deal with the information you receive," Gantar said. "If predictive analytics tells me we'll have a shortage next week, we will need the individual who knows what to do with that information in order to make proper supply chain decisions."
Asia's manufacturing infrastructure has grown into far more than cheaper labor, as China has grown from a source of value-priced goods to a powerhouse in manufacturing and design intelligence. Yet the massive disruption of the pandemic raises the question of diversification with a new level of urgency. Nations like China that never had to face instability didn't fare well in handling pandemic-related interruptions, whereas those accustomed to facing instability were less impacted, said Andrea Patrucco, an assistant professor of marketing and logistics. One example: the automobile industry.
"WE NEED TO THINK OF INVENTORY AS 'JUST IN CASE' AS WELL AS 'JUST IN TIME.'"
Ivan Gantar
"China provided inventory to the U.S. efficiently, quickly and at a reasonable cost," Patrucco said. But with the pandemic came delays, a fall of "last-minute" production – and prioritization of China's own local supply chains over those of the U.S.
Will China's role change? Will technology, geopolitics and the rise of other manufacturing sources bring new supply chain routes to the forefront? Much is still unknown, but this is clear: logistics, the business that once ran quietly behind the scenes, is emerging from pandemic times with new challenges, and a world of new options.
