COVID-19 has exposed many vulnerabilities in our supply chains. Of particular note are supply chains for food and personal protective equipment (PPE).
Most people take for granted that we can walk into a grocery store, and leave with a wide variety of food items. However, in Spring 2020, this was not the case. Many store shelves were bare, including some essentials such as flour and pasta. Many farmers destroyed milk, eggs, and chickens, while other crops rotted in the field.
Similar problems have occurred across almost every supply chain. Shortages of PPE occurred during the early stage of the pandemic. Most PPE production was concentrated in China. The combination of disrupted production and transportation and increased demand created shortages.
Shipping containers have made worldwide transportation more efficient and reliable. As a result, organizations have spread their supply chains throughout the world to increase their efficiencies. This has also led to concentration of production, a reduction in the number of suppliers, and added a bottleneck, as seen in the recent blockage of the Suez Canal.
The food supply chain illustrates many problems brought on by a search for efficiencies. To increase efficiencies, food supply chains are concentrating the growing of crops; food processors have grown larger to gain economies of scale; and members of the food supply chain reduced their suppliers to the point that they are dealing with only one buyer or seller.
Unfortunately, many of these increases in efficiencies can lead to increased vulnerabilities in supply chains.
- Biden administration studying supply chain ‘stress tests’: Sources (Apr 1, 2021, CNBC Television)
This post is based on The Counter article, How has the pandemic strengthened the global food supply chain?, by Bob Holmes, March 25, 2021; the Security Magazine article, Shipping containers as a threat to the global supply chain, by Charles B. McKenna, March 29, 2021; and the YouTube video in the Spotlight. Image source: Alex Bascuas/Shutterstock
1. Why do supply chains tend to focus on efficiency instead of resiliency?
Guidance: Efficiencies result in immediate cost savings that are tangible. Resiliency in a supply chain costs money in the short term, but the organization may never see a return on investment. Obviously, organizations hope that disruptions never occur, and thus they will not need their contingencies.
2. How can resiliency in the supply chain be improved?
Guidance: Organizations are already looking at increasing resiliency. A rebalancing of goals for the supply chain will most likely result.
Placing more weight on resiliency will change some supply chain decisions. Such decisions could include shortening of supply chains to reduce risk; adding redundancy, including multiple locations for production; larger inventory buffers to reduce the short-term impact of disruptions; and increasing flexibility in logistics methods.
Governments may provide some of these protections through a variety of methods. Already, the Biden Administration is looking at the supply chain, focusing on critical goods.
3. How has the pandemic exacerbated problems in the supply chain?
Guidance: Supply chains have improved their efficiencies and have operated more reliability over the last several decades. In particular, shipping containers are responsible for much of this improvement. This has led organizations to expand their supply chain, making it more global, as well as encouraging the movement of manufacturing to the most economical point of production.
A long global supply chain and centralized production increases the vulnerabilities of the supply chain. Additionally, no worldwide events on the scale of this pandemic have caused significant problems, which has encouraged organizations to focus on efficiencies.