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Covid Supply Chain

Reinventing the Supply Chain for a Post-COVID World

June 1, 2020
Be prepared to compete in a global economy that will look very different in the months to come.

It’s safe to say that the term supply chain has finally become a widely recognized concept, in literally every corner of the world. It’s just too bad that it took a global pandemic to familiarize the general public as to what a supply chain actually is. It’s also regrettable that the misperceptions as to how supply chains work are just about as numerous as the number of people who now use the term in their daily conversations.

Anytime a retailer has an empty shelf where a desired product should be sitting, the kneejerk reaction now is to blame the supply chain. And in a way, I think retailers should shoulder some of that blame, especially the mass market giants who’ve been telling their customers for quite a while now that “if you can’t find an item in our store, we’ll find it for you in another store. We can hold it for you at the other store, or we can just have it shipped to your house.” That’s a great idea… when it works. Trouble is, it doesn’t always work.

While we hear “why are they always out of stock of what I’m looking for?” laments every holiday season, it’s been the COVID-19 pandemic that’s truly shone the light on the darker corners of omni-channel’s limitations. When most of the country, if not the world, relocates from central offices to their own homes; when companies stop ordering products in bulk as their quarantined employees start buying products in eaches; when panic buying of certain commodities empties store shelves unexpectedly; and when customers can’t or don’t want to even enter a physical store or office for fear of contracting the virus—well, that’s a lot to expect from a supply chain. And especially from a supply chain that has been stretched, strained and strangled by circumstances that even the best forecasting models could have never foreseen, and that even the most technologically advanced distribution models could never fulfill at their previous levels of timeliness.

“Rising costs, shrinking capacity, and panicked customers [have shaken] up the freight transportation and logistics markets,” says Susan Beardslee, principal analyst at ABI Research. All transportation modes have been affected, in some cases drastically, with long delays in shipments for cargo sourced from China, she notes, and that’s on top of the already existent decreases in volumes that were a result of the tariff tensions with China.

Looking at long-term impacts from the virus, which has impacted the entire global supply chain, Beardslee observes, “There is little visibility to forecast, which will have a material impact on transportation and logistics this year. Transportation requirements will be hard to predict. Both capacity and pricing swings are anticipated across transportation modes, with the associated impact to shippers worldwide.”

“While we would all like to believe we can go back to the way things were and resume ‘business as usual,’ it’s not that simple,” adds Jim Tompkins, chairman of Tompkins International and one of the nation’s leading supply chain consultants (as well as a member of the MH&L Editorial Advisory Board). “The COVID-19 pandemic has fundamentally changed life as we know it, and businesses—and the government—need to be prepared for what will become the ‘next normal.’”

From a supply chain perspective, Tompkins suggests, “We all need to focus our attention on restarting the economy to place the evil of COVID-19 in our rear-view mirror.” Every company, he says, needs to develop a “reinvention success playbook and process” to guide them to the other side of COVID-19. Don’t focus on reopening your business or on recovery for your business; instead, concentrate on reinventing your business.

That reinvention process will require an even higher degree of leadership from your supply chain team than before. Tompkins points to the term VUCA (volatility, uncertainty, complexity and ambiguity), which was coined by the military to describe the situation at the end of the Cold War. The current pandemic, he notes, has brought on an unprecedented level of VUCA for the U.S. and global economy, and the reinvention process will require companies to pursue a strategy based on VUCA 2.0 (vision, understanding, courage and adaptability).

Form a reinvention team, Tompkins urges, and make sure everybody on that team and in your company understands the post-COVID strategy and vision you plan to pursue. And make sure everybody understands how they will contribute to the company’s success.

COVID-19 is a supply chain disruption like no other, with no recent precedent to help companies plan for its impact and no game plan to follow to mitigate its effects. We hear a lot about “supply chain resilience,” but ultimately resilience comes down to the ability and character of your employees to do whatever it takes to keep the doors open and the lights on.