#69 – Inside Our Industry – Supply Chain Lessons Learned From the COVID-19 Pandemic
Posted on | Inside Our Industry
We have been hearing for a few weeks now about the anticipated shortage of typical Christmas gifts, everything from electronics to clothing, thanks to the stresses on the supply chain due to the COVID-19 pandemic. The following from Forbes takes a look at possible ways to be prepared for any disruption going forward.
Supply Chain Lessons Learned From The Covid-19 Pandemic
Jim Witham | Forbes Technology Council | Sep 9, 2021
There’s no doubt that the tumultuous events of the past 18 months led to the massive disruption of many key supply chains. Although industries experienced supply chain fragility before the Covid-19 pandemic, the current scale and diversity of impact are unprecedented, with shortages in critical medical equipment, consumer electronics, cars and even lumber.
If we look at the past several decades, geopolitical trade wars, shipping delays, plant closings, raw materials shortages, earthquakes and tsunamis have all exposed supply chain vulnerabilities and sent ripples throughout regional and global manufacturing.
Although the inciting incident of these disruptions is different, they’re the same in that supply chains eventually rebounded or pivoted and operations pressed forward — that is until the next disruption came along. But were any lessons learned and new practices put into play?
More than any of these past events, the Covid-19 pandemic exposed the degree to which our global supply chains are fragile and lethargic in their ability to respond to unexpected changes in demand. Although disruptions are inevitable, we need to plan and respond differently if we’re to ensure global economic resiliency in the future.
My experience in the tech industry has taught me that there are four areas in which we need to look at the supply chain in new ways, but these all apply regardless of the industry:
- Vulnerability must be an everyday, not a 100-year, planning event consideration. The pandemic underscored the imperative of manufacturers and supply chain partners to do more than plan for infrequent and “100-year” events. We have to admit that with deep global economic interdependence, more serious disaster planning must become the defacto standard.
- The love affair with just-in-time manufacturing may be over. The just-in-time manufacturing mantra born in the auto industry during the 1970s enabled companies to adapt to fluctuating market demands and bolster bottom lines through inventory reduction. These practices were subsequently embraced by innumerable industries to achieve the same economic benefits. But the extent of pandemic-related shortages across vast ranges of goods now challenges whether these benefits are worth the tradeoff if the result is a significant lack of preparation for future disruption.
- Electrification megatrend means more companies are semiconductor-dependent. In our increasingly data-driven and electrified world, the products of a growing number of companies now require semiconductors, making them dependent on the chip supply to bring products to market. The current automotive industry spends around $40 billion on chips per year. This will only grow with the rapid transition to electric vehicles (EVs), which require four times the number of semiconductors. In our homes, there are semiconductors in air conditioning temperature sensors, rice cookers, refrigerators, LED lighting systems and, of course, in all of our digital devices from phones to laptops.
- Relationships between supply chain partners must evolve. Virtually overnight, the pandemic created incredible pressure for businesses to diversify not only their services and products but to reconsider their power and relationships within the supply chain. Large companies that canceled significant business with their smaller vendors and then returned assuming immediate capacity have been surprised that their place in line has been taken by others. Vendors diversified into providing services to other industries that needed them during the earlier stages of the pandemic.
The last 18 months of the Covid-19 pandemic have shown us that we can no longer think about the supply chain the way we used to. We need to transform the pain of that experience into new ways of thinking about and acting on relationships in our complex global supply chains. Put simply, it’s imperative to build toward a more resilient global economy.