By Larry Wigger
While much is yet unknown about Covid-19, its transmission, potential immunity, or efficacy of treatments, the world’s energies are turning more and more to the business of re-starting economic engines. Here in the U.S., our libertarian roots are showing, with public angst against any extended prohibitions on business and public activities. What some describe as draconian response to this modern pandemic has created unprecedented drops in production, services, employment, and wages. As businesses reboot, they are rightly considering what they will face, tremendous backlogs of pent-up consumer demand, along with the recent and still-evident supply chain shortages of household staples. But make no mistake, the vast majority of these shortages are temporal and spatial mismatches, largely arising from lack of visibility in our supply chains. Gaining visibility, not injecting inventory, is the key.
Supply chain management is about getting the right things, in the right quantities, to the right entities, at the right time, to the right place, all at the agreed upon quality, service, and price. The key to doing so consistently, is real time visibility to the full, relevant supply chain. For some timely examples, see my colleague Tony Vatterott’s recent piece on why the food supply chain is not broken.
Firms naturally seek to manage risk. Exponentially more so following idiosyncratic shocks like Covid-19. As I suggested in my recent piece on three things to watch in supply chains, companies will re-assess their global exposure in offshore production and their decreased control from outsourcing, and will explore new opportunities in the medical industrial complex.
It has been said that companies don’t compete – their supply chains do, and that won’t change. But in an effort to de-risk scenarios, renewed investments in technology will be made, some old, and some much newer. Big data, residing on cloud platforms, captured via the internet of things (IoT), and securely communicated via blockchain, can all be brought together for real-time visualization of a firm’s global value chains.
In spite of efficiencies in supply and latest technologies, Covid-19 has revealed the critical national and health risks from supply chain gaps. One solution some will advocate for will be massive Federal and state stockpiles of selected supplies, as part of the rise of the medical industrial complex. Some have envisioned each Federal, state, and local fiefdom with their own inventories of items they deem critical in an epidemic. However, we should acknowledge the tremendous cost of these redundancies and that while some of them may be warranted, many will not.
There has been talk of the current U.S. administration as a wartime Presidency and that may be a fair analogy. In truth, a wartime approach removes the constraints of deficit controls and inflation fears, as we’ve seen evidenced by the massive levels of stimulus spending just unleashed in the U.S. economy. Using the analogy of World War II, the U.S. Department of War pursued victory with production, selling war bonds not to raise funding, but to avoid inflation by removing currency from consumers’ hands to stifle discretionary spending. Following the war, U.S. service men and women returned home to factory jobs and spent the war bond savings, re-starting the economic engine. Today, it is just as critical that we return to economic activity and full employment. Confidence in a secure and transparent supply chain of required goods is critical to re-opening businesses.
Companies will build this transparency into their supply chains, as they should, to manage their own risks. Governments will do so, as they should, at least in the areas of supply deemed critical to life and health. The silver bullet would be to do so collaboratively. Lean operations and JIT inventory systems excel in efficiency and agility, because they rely on collaborative, trusted supply chain relationships and transparent, full disclosure of relevant information. Firms don’t share sensitive sales forecast data with transactional vendors, but rely instead on long-term partners. Doing so allows them to shift inventory levels back upstream in the supply chain. But when they do so, it is with confidence from full visibility to the total supply chain.
What I’m advocating is that we establish a real-time map of global value chains, interlocked with firms’ own proprietary data, to give government administrators visibility to the status and location of available inventories. By mapping the flows of goods, in times of crisis government administrators could identify necessary resources and coordinate the quickest and most efficient deployment to areas of need. Latest generations of security protocols, utilizing blockchain and crypto logic such as TripleBlind could protect firms’ competitive data, while allowing government administrators to stress test supply chains, much as we do the banking sector.
Toilet paper perceptions aside, the abundance mentality is still in effect. Let’s focus on collaborating to expand the value pie and not fight over who will get the largest slice. Companies will always compete with their supply chains. Federal, state, and local governments should not be forced to do the same.
About the Author
Larry Wigger currently serves UMKC’s Henry W. Bloch School of Management as Assistant Teaching Professor of Supply Chain and Operations Management. Larry is in the latter stages of his PhD in Economics at UMKC and holds both a Master of Science in Supply Chain Management and a general MBA from Elmhurst College and a BA in Business Administration from William Jewell College. With over twenty years of progressive and varied management experience, Larry’s expertise includes the full range of supply chain management activities, strategic leadership in multiple business start-ups, as well as, operations, project and program management.
Larry’s experience includes 15 years in the petroleum industry, frequently focused on supply chain management roles, including all facets of demand planning, material forecasting, strategic sourcing, contract negotiation, tactical procurement, 3rd party logistics, continuous improvement, life-cycle cost and sustainability. Additionally, Larry has held equity leadership positions in multiple start-ups across the construction and project management industry. These activities have included consultancy and at-risk construction work for major global petroleum, retail, and hospitality clients, support services in the recent fracking boom, and three years of post-earthquake construction projects in Port-au-Prince, Haiti.