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Supply chain expert: Coronavirus a ‘learning experience’ for companies

  • The coronavirus pandemic has been an important “learning experience” for manufacturers who are struggling with unprecedented demand and supply chain disruptions, an expert told Business Insider.
  • Many companies are now learning the hard way about “supply chain diversification,” the concept of using a variety of different suppliers to reduce the risk of having an entire supply chain cut off all at once.
  • It’s a predicament many American factories have faced firsthand as they attempted to pivot to producing medical supplies but immediately ran into challenges sourcing raw materials.
  • “We’re only going to come out better on the other side of this, once this is all said and done,” said Seckin Ozkul, a supply chain management expert at the University of South Florida.
  • Visit Business Insider’s homepage for more stories.

Americans adjusting to the coronavirus pandemic and the pivot to stay-home life have struggled for months with major shortages of key products, including everything from vital medical equipment and grocery items, to cleaning supplies and Nintendo Switches.

Most of those shortages stem from an unprecedented surge in demand, which caught companies off guard. In many cases, manufacturers also had trouble sourcing raw materials from countries like China, which closed factories for months to stem the coronavirus outbreak.

One expert said the disruption has been “a learning experience,” and that many US manufacturers are learning the hard way about the value of supply chain diversification — the concept of broadening a company’s range of suppliers to reduce the impact of a disruption.

Because nearly every industry in the country has been touched in some way by the coronavirus, the crisis doubles as a perfect opportunity for manufacturers to think creatively about how and where to create their products and source their materials, Seckin Ozkul, a supply chain management expert at the University of South Florida, told Business Insider.

That will only strengthen the US manufacturing sector in the long run, he said, as companies might open up new factories in the US or in neighboring countries, or push themselves to rely less on China and work with different countries.

N95 masks are prepared to be shipped at the Afya Warehouse, a non-profit medical supply recovery organization, during the outbreak of coronavirus disease (COVID-19) in Yonkers, New York, U.S. March 25, 2020. REUTERS/Lila Engelbrecht

N95 masks are prepared to be shipped at the Afya Warehouse, a non-profit medical supply recovery organization, during the outbreak of coronavirus disease (COVID-19) in Yonkers, New York, on March 25, 2020.

Reuters


“What I can tell you is I am sure every company right now is looking at their supply chain and thinking, ‘How can I diversify it further?'” Ozkul said. “If you were only doing business with China, and China closed for three months, you were in deep, deep, deep problems.”

That’s the predicament many medical supply manufacturers have found themselves in, amid sky-high demand for items like N95 masks and other personal protective equipment that hospitals have had to ration for months.

Though a number of American companies have sought to help by pivoting to producing PPE like face shields, some factory owners told Business Insider they were shocked that the US had no coherent, centralized plan for producing its own face masks, medical devices, and pharmaceuticals after decades of relying on China to create those products.

That will likely change going forward, Ozkul said, as companies that have traditionally relied on Chinese factories will likely want to prevent a similar crisis.

“Folks are now going to start thinking, ‘Can I open up a smaller facility? Or a facility in the United States? Can I open up a facility closer to the United States? Maybe Mexico? Canada?” he said.

Target toilet paper

Target shelves seen low on toilet paper in March.

Business Insider


Ozkul said experts frequently model potential supply chain disruptions in an effort to better understand how to prevent and solve them, but the problem is that those models typically account for local or national disasters like hurricanes — not pandemics that cripple the entire globe.

“Now, we want to look at this — it happened, and the next time it happens, we can be better prepared and we can actually take the necessary precautions so we don’t see the impacts as much as we saw it this time,” he said. “We’re only going to come out better on the other side of this, once this is all said and done.”

That lesson goes for consumers as well as manufacturers and suppliers, Ozkul said, adding that it’s important Americans recognize how their buying habits can affect others.

For instance, in early March, Americans flocked to stores to buy up massive quantities of toilet paper and other household items, leaving store shelves empty for months while companies struggled to ramp up production. That sort of behavior needs to change, and people need get used to buying no more than the amount they normally would buy, Ozkul said.

“There was no toilet paper, there was no Lysol, there was no Clorox. But then we also learn, ‘Oh yeah, maybe I shouldn’t buy 10 gallons of this thing, because it looks like there are supplies still coming in,'” he said. “Use as you were before, and therefore buy as you were before — otherwise you are buying the supply of your neighbor.”

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