The COVID-19 pandemic has raised our awareness and made “supply chain” a dinner table conversation topic. Unless you are in the manufacturing, procurement or logistics business — supply chain topics are limited to “last day to order for Christmas” or “trade war” political stump talk.
Not now.
We have become armchair QBs discussing shortages of household cleaning products, medical equipment and butcher aisle meats. First hand, we can appreciate the intricacies involved placing a roll of paper towels on the grocery store shelf. Consider the hand-offs between raw wood to paper pulp to paper towel production to distribution center to grocery store.
As government leaders, economists, business leaders and consumers we need take a hard look at our manufacturing processes. The virus instigated public health and economic decisions that uncovered frailties in many businesses and specific to supply chain configurations.
Business leaders are faced with evaluating the various layers of their supply chain. They must consider for each part required to produce the final product is there more than one supplier. Are there alternatives if a part is unavailable? Understanding the possible disruptions and plotting out a mitigation strategy is critical for maintaining a healthy, functional the supply chain.
I found this article very educational. Take a read.
How Maps And Data Are Helping Businesses Respond To COVID-19 Supply Chain Disruptions, Forbes, by Yasaman Kazemi. Retrieved on Apr 30, 2020.
A key theme of the article is understanding at the micro level, the supply chain layers and the interdependencies between the suppliers. Building a supply chain network map is one tool for managing risk and mitigation alternatives when disruptions happen. This seems like a critical exercise for creating a fact-based supply chain and managing risk. In addition, it serves up rich analytics to encourage real management discussions. This is a firm’s horizontal view of its supply chain.
Now shift your perspective. At the macro or federal level, there is an emerging lesson learned. We view goods through the lens of national strategic materials. Consider for a moment medical equipment and pharmaceutical assets in the strategic inventory, for example. Consider semiconductor technology as a keystone of national defense or the digital economy. This view cuts vertically across many businesses.
Here is a current headline. Take a read.
Trump and Chip Makers Including Intel Seek Semiconductor Self-Sufficiency, Wall Street Journal, by Asa Fitch, Kate O’Keeffe and Bob Davis. Retrieved on 11 May 2020.
The article highlights global supply disruptions. “Strengthening U.S. domestic production and ensuring technological leadership is “more important than ever, given the uncertainty created by the current geopolitical environment,” Mr. Swan wrote in the letter, viewed by the Journal.”
The piece I think that is open for discussion is the trade off between minimizing manufacturing costs by heavily sourcing material inputs from one country (or location) versus minimizing supply chain disruptions by spreading material inputs across multiple countries (or locations).
One approach seeks lowest cost and accepts supply chain disruption risks while the other approach spreads out the supply chain inputs and accepts higher material costs.
When the economy was booming, as it has been in the recent years, it seems as if firms optimized the supply chain for lowest cost. We accepted a largely global network which kept costs down and products readily stocked on store shelves.
I’m not advocating the opposite — nationalism.
I am wondering if an “alliance” of trusted suppliers — considering political, economics, geography, etc… — is a more acceptable strategy. At least for strategic materials and inventories, this approach may dampen supply chain disruptions and ensure products critical for our national, really global, well being are available when the next crisis strikes.
As consumers we have a part to play too.
- Understand the issues and insist our elected and business leaders can articulate the trade-offs. Re-imagining the supply chain will come with trade-offs: finished product costs, logistics, or labor.
- Get ready to learn and welcome new educational and vocational experiences. We are the labor pool to translate the ideas into action.
We may agree to build some goods “in-house”, but all of us must continue to embrace this is a global economy not just of goods and materials, but also services, knowledge and human capital.
Future State = Capitalism + Humanity
I’m coming to realize that the future state economy will be an equilibrium between the individual firm, the nation and the global supply chain. On a day-to-day level, firms can still seek their needed profit levels. Capitalism. In times of crisis — the world’s people will not be left wanting. Humanity.
