Last year in 2020 was a wake-up call. The formidable assumptions of the American logistics system were proven false. In a matter of days and weeks, seemingly strong and robust supply chains were proven fragile and highly dependent on transport connections that were vulnerable to social and border disruptions. Unable to handle sudden spikes in demand, the expected backup supplies never materialized and companies in multiple industries found themselves scrambling for the oddest materials needed, toilet paper and sanitizer being the most obvious of the bunch but not the least by any means.
2020 exposed a number of issues in supply chain management that should definitely be addressed going forward by any company dependent on logistics. These included the following:
- Missing Data – Company after company found themselves unable to tell where exactly their materials and supplies were and when they would arrive or what inventory levels were available. While things like bar-code technology had been available for unit tracking for decades, the weakness was in application. While the end retailer had a detailed system, its supply chain partners did not, and so things fell apart. Missing data made it much harder to switch and shift to alternative supply sources beyond immediate contacts because nobody knew anything with 2nd and 3rd level chain partners.
- Single-Sourcing Was a Mistake – The age-old lesson of not putting all of one’s eggs in the same basket rang loudly in 2020. Many companies had shifted over the years to consolidated suppliers that covered multiple needs all in the same address. These middleman players were highly dependent on all their suppliers being timely. When various breakdowns occurred from sources, these players could not compensate, and that cascaded to end parties as well. As a result, big companies that are typically expected to provide everything had empty shelves (think Costco or Target).
- Poor Digital Compatibility – As crazy as it sounds, many logistical partners are still not caught up with the latest technology tools and compatibility across supply chains. This deficiency came to the forefront when partners couldn’t even communicate accurately. As a result, endpoint companies now have to anticipate this problem ahead of time and have a backup plan.
- Back to Future on Inventory – Given what clearly happened with shortages in 2020, companies will have to go back to maintaining a sufficient level of inventory on-hand now instead of running far leaner. The logistical supply on someone else’s shelf assumption doesn’t work anymore. To avoid this problem, companies really have to look at having two or three months’ supply on hand now or deeper.
Given the above and more, it’s clear 2020 was a shock and needs a better approach to supply chain planning going forward. Whether one manages this internally or externally with outside help, a rethinking of current supply chains is needed. Take advantage of the lessons learned, even if painful. The key factor now is not to set up to make the same mistakes again when the next big shock occurs. There’s a lot of available information now on what happened in 2020 that can be used as “stress test” results on different industry supply chain channels. Companies should use this valuable goldmine as it hasn’t been replicated recently in other events and applies vividly to current systems versus textbook lessons from 20 years ago. Take advantage of the opportunity and shape the future versus being blown around by it again.
