By S. Scott Tielemans
In the history of our global society, we have survived pandemics, wars, and recessions. But the unprecedented spread of COVID-19 is rapidly forcing significant societal changes. People in every nation have altered their lives to adapt to widespread work-from-home realities, children out of school, and postponed or canceled plans and vacations. Businesses are also adapting — some by shuttering and waiting; others by adjusting retail models to embrace curbside pickup and delivery, and many by implementing strict public health measures for workers and customers. With these changes, people everywhere are struggling to find essential personal or professional supplies, and they’re starting to question what comes next.
No one can predict where the global economy and supply chain networks will stand after we’ve gained control over this pandemic, but it’s safe to say that business leaders worldwide are questioning the future sustainability of their current strategies. For the moment, they’re adjusting to changes daily, prioritizing and assessing the impacts on their businesses, employees, communities, and global connections. Going forward, the business world will face some hard choices on how to best safeguard people while still efficiently managing resources, products, and services to continue to meet consumer needs.
Supply Chains in the Wake of COVID-19
The current global economic model emphasizes efficiency and cost-effectiveness. With rapid transportation, automation technologies, and big data analytics in play, the business world has grown dependent upon a just-in-time supply of nearly everything. However, recent and unpredicted events have exposed some vulnerabilities in the optimized, centralized supply chain model. Fortunately, these events have also uncovered potential solutions that can make supply chains more fault-tolerant.
The world’s largest 1,000 companies and their suppliers have over 12,000 facilities in quarantined areas of China, South Korea, and Italy. As governments across the globe issue shelter-in-place orders and limit exports and imports, logistics flows at those facilities have slowed or stopped, causing shortages around the world. But this isn’t the first time businesses have struggled in response to catastrophe. In 2011, floods in Thailand resulted in the shutdown of the only factories worldwide that built computer hard drives and certain components for automakers.
Events outside of predicted expectations — such as COVID-19, the 1973 OPEC Oil Embargo, and the 2011 Thailand floods — undoubtedly disrupt supply chains. Yet it is through these events that business leaders can discover and explore new ways of working together toward a better, stronger tomorrow. Now is the time for supply chain leaders to plan and build resiliency into their operations for the next high-impact disruption.
Reintroducing redundancy and diversity into the supply chain is prudent in moving forward. While multiple supply chain and production pathways may seem contradictory to efficiency, these are key principles of resilience. We’re seeing companies agile enough to retool manufacturing equipment or adjust their strategies to bolster emergency relief rise as global leaders. For example, many auto manufacturers are working on making ventilators and face masks. And shortly after the declaration of the global pandemic, Microsoft leveraged its global supply chain to mobilize the import of tens of thousands of critical medical supplies into the U.S..
Preparedness in the face of multiple — but plausible — future scenarios challenges a business’s assumptions about lowest-cost models. Business leaders should strive to build resiliency and risk reduction into their plans and investment calculations by illustrating the potential business value to their customers and shareholders.
Impacts of Globalization and Trade Networks
Like other nations, the U.S. has been largely caught off guard by the sudden need for medical supplies. Personal protective equipment (PPE), including pharmaceuticals and surgical masks and gloves, are required for effective response during a pandemic, yet they are produced in relatively few locations globally. This event has revealed vulnerabilities and single points of failure in cost-driven, streamlined supply chains. Nations and economies that rely on single sources for critical gear or items are suffering shortages, and many of those nations now lack the raw materials, supplies, production capabilities, and distribution of items that were — until recently — readily available in abundance.
Moving forward, business leaders should continue to rely on sound business intelligence and incorporate enhanced worst-case-scenario development and pandemic-related risk-management practices. Physical, political, and financial disruptions can happen; for most organizations, entities, and nations, it’s not a matter of if, but when. Risk management must consider the impact of massively disruptive events, how they’ll affect the supply chain, and what may be done to mitigate significant adverse effects. Recovery strategies require both agility and flexibility, which may seem more expensive in the short term, but will prove to keep supplies moving throughout and beyond the current — and next — high-impact global event.
Putting Communities First
From a human perspective, the loss of life that comes with this and other crises is tragic and deeply felt by everyone it touches. From an economic, diplomatic, and security perspective, COVID-19 has unleashed a rapidly changing, long-duration global crisis event. People thrive on certainty, and in this case, there’s little to be had. However, there are often great positives we experience when in crisis, including human initiative, ingenuity, the goodwill of people and a driving desire to put communities first.
Communities around the world are exhibiting genius, innovation, and cooperation with a shared desire to return the world to normalcy. Medical research teams are working around the clock to develop vaccines and treatments; large and small businesses are adjusting to life on lockdown or modifying their goods and services to meet crisis demands; governments are providing aid and relief for ill and displaced workers, and individuals are mobilizing to meet community needs. We’re witnessing some of the best reactions humanity has to offer.
While the supply chain is struggling to keep up, that same ingenuity and goodwill are keeping industries moving forward. Manufacturers, distribution centers, and the commercial transportation industry have shown their dedication to people everywhere in this time of global need:
- Defense and textile industries have transformed production lines to make N95 masks in the millions per week.
- The auto industry has teamed up with Ventec Life Systems and Space X to make ventilators.
- James Dyson, owner of Dyson Vacuums, designed, built, and put into mass production a COVID-19–focused ventilator in just ten days.
- Microbreweries all over the nation are converting a common byproduct of the beer manufacturing process to a potent and readily available hand sanitizer.
COVID-19 has changed business assumptions across nearly every industry, and manufacturers are rethinking their global supply chain operations in response. By balancing cost, flexibility, and risk-management, manufacturing industry leaders can develop resilient supply chain strategies that better protect their businesses, the global economy, and the communities they serve. If you’re ready to see how your organization can achieve a fault-tolerant supply chain strategy across more global markets, read the Tech Data Global Lifecycle Management whitepaper, Get Ready. Get Set. Go Global.
Scott Tielemans is an Offerings Portfolio Manager with Tech Data’s Global Lifecycle Management – a specialized solution business. His responsibilities include market research, business value creation, lifecycle service offering development and portfolio performance.
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