How Supply Chains are Being Impacted by Coronavirus
March 30, 2020
The coronavirus (COVID-19) has uncovered numerous flaws in supply chains, according to Mike Loughrin, an adjunct professor in the online Master of Business Administration program at the University of Northern Colorado and CEO of Transformance Advisors, a consulting and education company for businesses.
“I know many experts claim supply chains are nimble and responsive, always sensing customer demand and able to rapidly react to changing conditions,” Loughrin said. “Coronavirus has exposed the truth: long lead times, lack of flexibility, shortage of local suppliers and complexity, which makes our supply chains act like a house of cards.”
Loughrin shares how the pandemic is further impacting supply chains:
- The understanding of supply-chain risk will be changed forever. Too much risk has accumulated in the global supply chains that has left no room in dealing with disruption.
- The balance of low cost and flexibility needs realignment.
- Supply-chain strategy development and execution will be sought-after skills. Thinking beyond the smooth flow of products and services needs much more focus on risk and corporate responsibility.
- A best practice known as sales and operations planning is the tool for executives to navigate their organizations through this “storm of the century.” Those who have failed to effectively adopt this leadership process may pay the price.
Under normal circumstances, the majority of supply chains “are like streams and rivers flowing from the mountains to the ocean.” An example includes paper machines running 24 hours a day, seven days week to make toilet paper that then ships to stores and ultimately to consumers.
As supply-chain managers seek to cut supply costs, they reduce their extra capacity to make enough supplies to meet any sudden increase in demand. With the paper machine example, the machines are running as fast as they can, so the sudden increase of demand for toilet paper creates a very visible shortage that’s not easy to fix.
Loughrin said that during this pandemic, everything, including people and equipment, must come together to conquer this situation.
“While the response of our supply chains seems painfully slow, we’ll see increased production and then the response will likely over-shoot our needs,” he said. “This concept is called the bullwhip effect, and all supply-chain people know excess supply is coming … we’ll soon have hand sanitizer coming out of our ears!”
Snapshot of Toilet Paper Manufacturers
There are 11 factories across the U.S. that manufacture toilet paper, all of which are 24-hour operations and employ 7,500 people. Toilet paper sales across the nation have jumped about 213% during the week ending March 14, compared to the same time frame last year, according to Nielsen, a market research firm.
This real-time situation offers a great teachable moment in Loughrin’s online MBA courses. He plans to integrate the following new information and examples from the coronavirus pandemic into his courses:
- Supply Chain Management course: Exploring the impacts of the coronavirus, and other possible disruptions, on global supply chains with an emphasis on supply chain risk management, supply chain strategy and the need for upside flexibility in capacity.
- Lean Transformation course: An increase focus on waste found in extended value streams and the folly of locking in a smooth flow without also building in the ability to respond to rapid changes in demand or supply.
- Six Sigma course: Examining how analytical tools can be used to both reduce variation and respond to external shocks to the system.
—Written by Katie Corder