From its onset, the coronavirus pandemic caused major disruptions to supply chains that led to nationwide shortages for many essential products. Consumers witnessed empty shelves when shopping for items like toilet paper, paper towels and disinfecting products. Three months later, some supply chains have recovered to an extent but for others, like suppliers of disinfectants, restocking shelves continues to be a problem. What caused the breakdown and what can we expect from supply chains in the future?
“The disruption brought on by the coronavirus was dramatic wreaking havoc on staffing, sourcing, warehousing, logistics and transportation,” said David Kurz, EdD, a clinical professor of management in Drexel University’s LeBow College of Business, during a recent interview for KYW Newsradio’s “In-Depth” podcast.
According to Kurz, the thing to keep in mind about supply chains is that they are very tailored and customized by industry, product and consumer.
“A supply chain that works well for one kind of product designed for consumers, will not be the right one for another in the industrial space,” he said. “Supply chain leaders strive to be efficient. Their job is to satisfy customers at a low cost. Before the onset of COVID-19, the focus was on lean, low cost and efficiency. Companies would develop forecasts and models to help predict demand for products, and the closer to the forecast things were, the better the job of satisfying customers and keeping profit margins growing. With the disruption brought on by the outbreak of the coronavirus, the forecasts and predictions, and the networks and relationships formed to deliver with low inventories and managed costs was blown up.”
Kurz cautioned that this disruption should be viewed as a permanent change not just a temporary adjustment to the old models.
“You can look at impacts in a number of different ways,” he said. “Take people first. During a pandemic, safety should be paramount. The workforce has been upended in obvious ways. Companies that were more advanced in having a digitally enabled workforce and allowed employees to work from home, without losing huge amounts of productivity and access were able to survive the disruption better than companies that have been putting off digital workforce relying more on face-to-face interactions to make and deliver products.”
Automation also played a huge role in how companies responded to the crisis. According to Kurz, companies that have been using robotics and more machine-based logistics, have fared better. Through his recent research for the non-profit research team at the Digital Supply Chain Institute, Kurz found that firms were making progress on digitalization efforts and — as a result of the hardships brought on by COVID-19 — consider them essential to operations.
“The big takeaway is how can the business model, and the supply chains that support them, become more automated and provide fewer friction points with face-to-face human contact,” Kurz said.
An example of how companies are adapting to this changed model is Starbucks. The multinational chain recently announced that it was shutting down up to 400 locations over the next 18 months while also speeding up the expansion of “convenience-led formats” such as curbside pickup, drive-thru and mobile-only pickup locations.
“We’ve learned that digital transformation of supply chains can’t wait anymore,” said Kurz. “It was optional for some or considered too hard or expensive to make investments in people and technology, while managing risks. Now the urgency of changing business models and the supply chains to match are a form of survival. Firms that wait or refuse to change, may find themselves a victim of this event.”
Firms that get around to making investments in digital supply chains and start to realize the benefits of being able to continue operations safely now, may see cost savings and efficiencies tally up, according to Kurz. “There will be little incentive to go back to older traditional ways of operating,” he said.
Kurz will host a webinar on July 15 that will address the leadership required to navigate the current supply chain challenges firms are facing. More information is available at this link.
Media interested in an interview with David Kurz should contact Niki Gianakaris at ngianakaris@drexel.edu or 215-895-6741.
