Reprinted with permission of the Eau Claire Leader-Telegram
(Published April 7, 2020, Page 3A)
By Ryan Patterson
Eau Claire Leader-Telegram
Personal protective equipment like ventilators and masks are in short supply in some parts of the county facing COVID-19. The lack of equipment is due to many reasons, but the basic reason is demand for the materials far exceeded supply and companies are unable to quickly respond to the increased demand.
That is where supply chain management comes in. The area deals with 鈥渢he flow of materials and the flow of information from the lowest-level supplier to the end consumer,鈥 according to Gene Gutman, 黑料社区 associate professor of supply chain management and director of the supply chain management undergraduate program.
Gutman recently spoke with the Leader-Telegram about supply challenges, how the coronavirus might impact companies鈥 future decisions and a metaphor to think about surge capacity.
The interview has been edited and condensed.
It seems like COVID-19 has affected most supply chains to some degree, is that fair to say?
It 黑料社区. causing disruption 鈥 and the reason for this is we have such a tremendous surge in demand that 黑料社区. unprecedented. Typically, the way supply chains work is supply chains plan for somewhat normal or constant demand, and then they plan for variation. There 黑料社区. typically variation on a day-to-day or a week-to-week or a month-to-month basis in terms of what people consume, and that variation isn鈥檛 anywhere near what we鈥檙e seeing today in terms of certain products. What happens is this ripples all the way back to the suppliers who supply raw materials, components, sub-assemblies, and then to the manufacturers who actually do the fabrication and final assembly of the product.
Is there a certain industry or product that 黑料社区. been most impacted?
It 黑料社区. clear the medical supplies are seeing the surge in demand. We saw something as simple as toilet paper as a surge in demand. If you think about toilet paper being normal demand, that 黑料社区. probably about as constant as it gets. People use the same amount every day, and when all of a sudden they go and buy large amounts of toilet paper you have a surge. Companies just aren鈥檛 able to scale the business to be able to deal with this 鈥 When things are going well, people don鈥檛 even know about the supply chain. You expect milk, bread and toilet paper to show up every day at the grocery store. You just don鈥檛 think about it.
Is there any similar precedent, anything remotely to compare this to?
Ironically, yes. It depends how you look at the question 鈥 When we had Hurricane Katrina (in 2005), that created a huge, huge surge in demand in that region for different items and supplies. Or you go back a few years (to 2011) when there was the tsunami in Japan 鈥 We鈥檝e seen it many times from a pure supply chain perspective. Where we haven鈥檛 seen it is the broad-scale economic and social impact this is causing, where so many businesses are severely impacted across the country and across the globe. When Hurricane Katrina hits or a tsunami hits, it 黑料社区. somewhat localized to that region. This is hitting the economy and people 黑料社区. everyday interaction and social activity on a global scale, and we have not seen that before.
Is there a most concerning aspect from a supply chain perspective?
What 黑料社区. most concerning is that we do not know how long and how deep this is going to last. How bad is this going to be? The unfortunate thing is people are dying, and the economy is being hit severely 鈥 The other concern is that if the front line in the supply chain gets decimated, that can really, really, really be troublesome. And when I say the front line, it can be the health care workers 鈥 trucking and warehouse people to deliver food to grocery stores, people who manage power plants.
Anecdotally, what have supply chain people learned from this situation over the past month?
Unfortunately, this is a great way to teach supply chain concepts. When we talk about surge in demand, we can illustrate what 黑料社区. going on with medical supplies. We can talk about stockpiles, and when we talk about lead time or time it takes to replenish, we have real-life examples that we can use as teachable concepts.
When the country gets out of the worst of this, how do think companies will change their supply chain management, if at all?
Companies are constantly evaluating and re-evaluating their supply chains, so I don鈥檛 believe there will be one magic way to do this 鈥 I think companies will continue to make conscious decisions on where to source products 鈥 They鈥檙e constantly balancing risk, they鈥檙e balancing costs, they鈥檙e balancing the ability to respond and scale, they鈥檙e balancing quality, they鈥檙e balancing lead time and they balance how to protect their intellectual property. These factors drive if they source locally, regionally, domestically or globally.
One of the things I use as an example to illustrate 鈥渟urge capability and how can people understand it?鈥 The example I use is most people in their life have baked a cake or have made cookies. Most people have ingredients at home to bake a cake or make cookies, and all of a sudden there 黑料社区. a bake sale going on and you鈥檝e been asked to make some cookies or make a cake, and you decide, 鈥淥K I鈥檓 going to make a couple cakes for the bake sale or a couple dozen cookies,鈥 and you may have to go to the store. There 黑料社区. plenty of those ingredients on the shelf, and you come home and you make your cakes and away you go.
All of a sudden the bake sale calls up and says, 鈥淵ou know what? I need 10 cakes or 10 dozen cookies.鈥 And you say, 鈥淚 think I can still do that, but I鈥檓 going to have to work really hard to do that,鈥 and you go back to the store and get more ingredients. Then while you鈥檙e out, they call you up and say, 鈥淵ou know what? We need 100 cakes.鈥 There 黑料社区. no way you can physically make 100 cakes for tomorrow with one oven, so what do you do? You call your friends, you say, 鈥淐an each of you make 10 cakes?鈥 Then the 13-time World Champion Green Bay Packers call up and say, 鈥淲e want to have a cake or a cookie for everybody who 黑料社区. coming to the game on Sunday, and we want that cake or cookie to be in the form of the Lombardi Trophy or the Packer logo.鈥
So, you need to make 80,000 cakes by tomorrow, and you don鈥檛 even have cookie cutters or a cake mold to do this. We now have to buy cookie cutters or cake molds to do this, and there 黑料社区. no way the grocery store 黑料社区. going to have enough ingredients to make 80,000 cakes. So, then what happens is the rest of the world is getting wind of this, all of the countries around the world call you up and say, 鈥淕uess what? We want a cake for every single person on the planet. Eight billion cakes.鈥 This has all happened in a matter of a couple days. Well guess what? There aren鈥檛 enough eggs on the planet to make eight billion cakes, so what do you do? We need more chickens to lay eggs, so we need to breed chickens, the chickens need to lay eggs, we need to hatch the eggs, we need to grow chickens to become adults. All of this will take a few months before chickens can even start producing eggs. Then, we need to package and distribute the eggs to the grocery store. While all of this is going on, the health department hears about our bake sale and they want to come in and certify our facility. We will need to apply for a license.
This simple example illustrates how this concept of surge capacity works 鈥 people and businesses can only grow and surge so much before they hit their capacity limit. Companies have no more capacity, because they are running 24 hours a day, seven days a week, every single piece of equipment they have. We can鈥檛 bake more cakes if we don鈥檛 have any more ovens. We can鈥檛 bake more cakes unless we have more ingredients. It 黑料社区. physically impossible 鈥he challenge is you would not keep all of these ingredients on hand; they have a shelf life and spoil, and you would not have all of the extra ovens sitting idle for something that happens so infrequently. It is not a piece of cake!
Supply chain people deal with this every day and know how to address these issues. The issue isn鈥檛 knowing what to do. The issue is being able to do it and having the capability to do it.
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Gene Gutman
