May 25, 2020
As the nation starts to open up the economy, we are starting to see grocery shelves filling and high demand items replaced. It has been since February that consumers started to see a break in the supply chain, but the trucking industry saw it much earlier with a lack of trade in China compounded by the Coronavirus that brought manufacturing to an abrupt halt in many areas.
According to a recent article by Publicis Sapient and The Organization for Economic Co-operation and Development (OECD), the coronavirus could cut global economic growth in half, with industries in every sector facing disruption in supply chains, suspending business operations and shrinking revenues.
Retailers around the world are grappling with the appropriate response to the coronavirus for their employees, customers, and their business. For many, it's shaping into a once-in-a-generation test of business continuity, planning, and supply chain flexibility. — Hilding Anderson, head of strategy, retail, North America, Publicis Sapient
Anderson goes on to say the impact on the supply chain is twofold.
Clearly, trucking is only accountable to one link of the chain in supply. Manufacturing, procurement, logistics, and financing all play a role in the success of a fluid supply chain. However, controlling the purchase seems to be paramount in the process. A strategy in how to align the goals of procurement with the overall business objectives across the board seems to be the key to keeping the chain strong. Unfortunately, procurement teams are struggling the most. While many have been trying to keep up with global response measures by working diligently to secure and protect supply lines, vital information is often not accessible which has resulted in responses that are reactive or often time mismanaged without even knowing it. It’s just not something anyone has ever had to manage. An example of a crisis in the breakdown is the meatpacking industry.
Meatpacking Industry Devastated by COVID-19
The meatpacking industry is being devastated as a result of the virus, and thousands of employees have reportedly tested positive for COVID-19 forcing many companies to shut down. That means the animals are left on the farms with no margin of error in the chain of supply. The consequences have been tragic. The reduced capacity for processing hogs into pork is forcing farmers to euthanize their pigs.
Jason Lusk, the head of the agricultural economics department at Purdue University, estimates that there is currently a 40 percent reduction in meat processing capacity, which will lead to 200,000 pigs per day being left on their farms.
Pork production has always been a finely-tuned, just-in-time supply chain based on the critical need for efficiency in the time and cost of production. With packing plants shut due to the virus, hog farmers have nowhere to sell their ready-for-market pigs and not enough resources to continue to feed them. Processing is the broken link in our food supply chain which has not only devasted the meatpacking industry, it has also created a disconnect that many Americans are facing unemployment, poverty, and hunger. The idea that thousands of pigs per day are being destroyed while many Americans are hungry is unthinkable. This crisis is also impacting the trucking industry for obvious reasons — there is simply no product to carry.
The Dairy industry is facing the same kind of dilemma. With restaurants and schools closed, a large part of the market has disappeared. The usual production of milk exceeds the demand and because of a similar just-in-time supply chain, the product is wasted. Fortunately, farmers are finding ways to get the product to where it is most needed – food banks and non-profit organizations helping to feed those hungry Americans.
Preparation and Recovery
What we have learned during this time of crisis is that preparation from all players is critical. We all know that when a disaster strikes, everyone in the supply chain suffers the consequences — buyers, suppliers, truckers, and consumers. This is particularly the case in times of natural disasters like tornado and hurricanes. That is why many companies, especially trucking and logistics are already incorporating disruption-related metrics in their evaluations of the supply chain. Trucking companies in the tornado belt have no choice. They need a back-up plan based on the metrics and history of disasters in the area.
In the case of COVID-19, strategies are untested and there may be risks but the lessons of this crisis should be acted on now. An investment in mapping supply networks to make informed decisions and thorough alternatives when the next crisis strikes is vital.
Thanksfully, there are examples of preparation prior to COVID-19. The success of a small minority of companies that invested in mapping their supply networks before the pandemic has proven some success in handling the consequences. Supply network analysis and mapping gave them better visibility into the structure of their supply chains. The process enabled informed decisions and an immediate overview of the supply chain network including suppliers, parts, and products. The results put them ahead of the curve for securing the necessary inventory and capacity first.
Contingency plans to Accelerate a Better Outcome
It cannot be stressed enough how important contingency plans can be in addressing the issue before a catastrophe.
4 Steps to take BEFORE a Catastrophe
Events like COVID-19 create issues that have a short-term and a long-term impact. While panic buying can be overcome, unemployment and the market reaction are harder to anticipate or measure.
For many, it's shaping into a once-in-a-generation test of business continuity, planning, and supply chain flexibility. — Hilding Anderson, head of strategy, retail, North America, Publicis Sapient
With the current COVID-19 pandemic, it is hard to tell how the market will react but what we do know is that it WILL react, and we need to be ready. Nitin Dsouza, director of strategy and transformation, Publicis Sapient, London, suggests that organizations should start with scenario-planning strategies, where different demand environments are considered across the entire supply chain.
While different organizations face unique risks, companies should develop plans for both optimistic and conservative situations. In the case of COVID-19, this is defined as:
While the supply chain disruption has been catastrophic in some cases, there is a light at the end of the tunnel, especially in the trucking industry. As the nation begins to slowly rebound, trucking knows more than most that Americans are resilient, as is the American economy. What we have learned from the virus so far is that with flexibility in the supply chain and adaptability in the workforce, we can get through almost anything.