Supply chain has become top of news and top of mind. But even before the COVID-19 global pandemic, the supply chain industry had its own set of challenges.
By Marsha Lynn Bragg, SWE Contributor
As the coronavirus pandemic continues to grip the world, its deadly and lingering effects have disrupted every aspect of life. The pandemic has impacted the health and well-being of individuals, as well as the health and well-being of the commodities that we’ve come to rely on — that are made possible by the consistent flow of goods and services through what is known as supply chain.
Industrial engineer Shimon Gowda of Chainalytics, a supply chain consulting company, says the industry had a high customer-centric focus with efforts toward obtaining faster, better delivery to the customer and enhancing the overall customer experience. Many attribute the disruption in the supply chain to its focus on cost rather than investing in the industry to make it more flexible, agile, resilient, and readily adaptable.
Gowda, a manager of supply chain design practice, has worked in supply chain for nearly a decade. She works with clients to design and optimize their distribution networks to understand the trade-off for cost, service, and carbon footprint.
“With the pandemic, the efforts have moved a hundred steps backward, because now the focus is just on getting things out the door,” she said. “This in turn has affected the sustainability efforts and ESG [environmental, social, governance] efforts of a few companies whose primary effort is now focused on solving the numerous hiccups in the supply chain.”
So disruptive and disconcerting the situation that the White House issued an executive order in February 2021 to review critical U.S. supply chains to identify risks, address vulnerabilities, and develop strategies to promote resilience so that any future disruption to the supply chain would be short-lived.
The initial review of supply chains examined four critical products: semiconductor manufacturing and advanced packaging; large capacity batteries; critical minerals and materials; and pharmaceuticals and active pharmaceutical ingredients. The latter was particularly troublesome as the pandemic hurt the U.S. health care system and its ability to obtain and distribute essential medicines.
“With the pandemic, the efforts have moved a hundred steps backward, because now the focus is just on getting things out the door. This in turn has affected the sustainability efforts and ESG efforts of a few companies whose primary effort is now focused on solving the numerous hiccups in the supply chain.”
– Shimon Gowda, manager, supply chain design practice, Chainalytics
Forcing an industry to self-reflect
Veteran industrial engineer Jessica Rannow, who works in the pharmaceutical industry, attests to the challenges supply chain disruptions have caused. She is the senior program manager on the customer operations team at AmerisourceBergen, a global drug wholesale company. “Drug shortages have been an increasing issue in the pharma supply chain. Whether it be due to manufacturing issues, discontinuation, recalls, or something else, at any point in time there are many products that aren’t available or have limited availability.”
At the onset of the pandemic, Rannow, a longtime SWE member who served as FY17 Society president, says her industry saw “huge booms in orders as customers sought to quickly refill scripts before quarantine. Then, as we went forward and hospitals focused on ICU beds, demand dropped for many items while others surged,” she said.
Rannow says allocation methods are in place to prevent customers from purchasing all of the stock to ensure a fair share will be able to be ordered by all customers. “Coming from other supply chain industries, this isn’t something we thought about. If you ordered all of a product available from Bath and Body Works, for example, it was simply out of stock until more is manufactured.”
To better monitor these kinds of imbalances, the White House in June created a national supply chain disruption task force to address supply and demand mismatches that emerged in several sectors after the administration launched its vaccination and economic relief efforts. In the past, natural or human-caused disasters have affected parts of the supply chain or a specific industry segment.
“I have been a supply planner and production scheduler, and basically every day is about solving a crisis or a problem,” said Christine Barnhart, vice president of product strategy and go-to-market with Verusen, a supply chain intelligence platform.“This is just the first one we’ve had in 100 years that has impacted every single country on the planet. Simultaneously.”
The pandemic has forced the industry to self-reflect, says Barnhart, who has served the supply chain for more than 20 years. She notes that companies that have made investments beyond their enterprise resource planning have invested in multi-enterprise business networks or have started to apply advanced intelligence tools have probably fared better, especially those that have created collaborative networks with their suppliers and customers.
Gowda believes the pandemic will have long-term consequences on the planning space for years to come. Companies that have prospered from higher COVID-19-related demands have dealt with shortages of both raw materials and available capacity. Those that saw their sales decrease had to slash costs quickly and or make major changes to their product portfolios, Gowda says. Now companies in both camps have an urgent need for a sales and operations planning process or an integrated business planning process to help them make better planning decisions.
“The supply chain has often been invisible as customers went to the store to pick up products and just choose from what was available. As we shifted to online ordering, customers are more aware of things being out of stock and delays in shipment. Our expectations have also changed to wanting things overnight and not wait three weeks for it to arrive.”
– Jessica Rannow, FY17 SWE president; senior program manager, customer operations, AmerisourceBergen
The cost of instant availability
“When you start to get into specific items from specific brands, that’s a very different conversation, especially on the consumer versus the customer side,” Barnhart said, adding that a distinction between the two is necessary because a lot of things supply chains do for customers the consumer never sees.
“I think we have become somewhat complacent in especially what I call the developed world where we are used to things being available almost immediately,” she said. “And if they don’t have them in my local store, I just order it on Amazon, and within a day or two it’s here,” she said. “What COVID has shown us is that there is actually a lot of costs associated with that instant availability, and that depending on what’s happening in the world, it may or may not be possible.”
Guy Platten, secretary general of the International Chamber of Shipping, a global trade association for shipowners and operators, penned an opinion piece in The New York Times, stating, “With prices of gasoline, groceries, and more spiking, the United States should take the lead in restoring order to supply chains before it is too late. By using its influence, the United States should persuade other countries to address an underlying cause of the crisis — working conditions for transport workers.”
By transport workers, he refers to those who drive the trucks, fly the planes, and crew the ships responsible for moving all these goods — around $19 trillion of world trade annually, he says in the Nov. 17, 2021, article. “Governments have been too slow to act,” he said. “Not only that, the way these workers are treated contributes to the fewer trucks, trains, and planes.”
Barnhart agrees. While many surmise the situation as a truck driver shortage, a significant group of people who have been trained and have their commercial driver’s licenses are choosing not to drive, she says. The causes are varied — from older workers aging out to retention to lack of incentives. Both say that how society treats transport workers is a major factor, including how much they are paid, the inadequate facilities available to them upon arrival at a port or distribution center, and lack of support and accountability should problems arise en route.
“I think we have become somewhat complacent in especially what I call the developed world where we are used to things being available almost immediately. … What COVID has shown us is that there is actually a lot of costs associated with that instant availability, and that depending on what’s happening in the world, it may or may not be possible.”
– Christine Barnhart, vice president, product strategy and go-to-market, Verusen
What about my …
Computer technology and analytics company Oracle released a new study (November 2021) that asked 1,000 U.S. consumers how they felt about the current supply chain crisis. Oracle reported that supply chain disruptions have left people feeling frustrated (61%), impatient (46%), anxious (45%), and angry (34%). Additionally, 82% said they are concerned that supply chain disruptions will ruin their life plans such as birthdays, holidays, trips, and purchasing necessary items such as school supplies.
Eighty-seven percent said they were negatively impacted this year by the crisis, with 60% canceling orders and 80% cutting ties with favorite brands. In sum, 90% of consumers said they consider the supply chain when purchasing today. Prior to the pandemic, just 45% paid attention.
While the survey results may be disheartening, Rannow says it’s good news that the issue is finally drawing attention. “The supply chain has often been invisible as customers went to the store to pick up products and just choose from what was available,” she said. “As we shifted to online ordering, customers are more aware of things being out of stock and delays in shipment. Our expectations have also changed to wanting things overnight and not wait three weeks for it to arrive.”
“When you think about the hierarchy of needs, are basic needs going to be met? Absolutely,” Barnhart said. “Are you going to be able to find that brand or the exact item you want? Not necessarily,” she said, advising customers to be flexible and even consider a substitute brand.
The Oracle survey also showed that supply chains are now a critical part of consumers’ decision-making, noting that 58% would stop buying from a brand after one to three delays or disruptions. Most people (91%) understand that supply chains are complex, but 94% want more support from brands to ease their worries.
With this in mind, Gowda hopes that more supply chain professionals keep a broader mind and attitude toward learning, accepting, and implementing more technology and digitalization tools to simplify and automate monotonous jobs while, at the same time, not take away jobs. “Human intervention will still be required, but by automating several tasks, we can now focus on innovation, empowering mental well-being of our workforce, and add value to our everyday tasks without having to feel mechanical or redundant.”
The Biden administration has negotiated $17 billion in investments in port infrastructure as part of the Bipartisan Infrastructure Deal. The funding would help address congestion and supply chains over time by investing in repair and maintenance backlogs and reduce congestion and emissions near ports.
“I’m excited about the U.S. investment in infrastructure; it is sorely needed,” Barnhart said. “I’m also super excited to see supply chain finally enter the vocabulary of not just executives but the community at large. Now it is up to us to leverage our platform to make supply chains better — and that is definitely resilience and agility, but it is also being good to the planet by building sustainability into our designs and investments.”