Abe Eshkenazi, chief executive officer of the Association for Supply Chain Management, discusses the findings of a new report by ASCM and the Economist Intelligence Unit, examining how more than 300 publicly listed companies withstood and responded to supply-chain shocks of the last year.
Among the major conclusions of the report was that business-continuity plans weren’t sufficient to address shifts and surges in demand in the early stage of the pandemic. Organizations lost visibility beyond their Tier 1 and 2 suppliers, Eshkenazi says.
One might expect that previous supply-chain disruptions would have led to the development of adequate response plans, but that wasn’t the case with a crisis on the scale of the global pandemic. What industry was good at prior to that event was efficiency. Companies employed just-in-time fulfillment strategies and emphasized lowest cost in order to meet customer demands for rapid delivery of goods. But those capabilities didn’t prepare them for the supply-and-demand disruptions caused by COVID-19. Supply chains “were good at just-in-time, not just-in-case,” Eshkenazi says.
Now, companies are rethinking their inventory strategies, combining their traditional emphasis on efficiency with one of financial stability and resiliency of the supply base. In the event of another crisis, such as the current shortage of semiconductors, they need to determine who’s responsible for supply redundancy and the additional capacity needed to ensure continuity of production. Making that happen will require a public-private partnership, with the government training its focus on the durability of critical supply chains, as evidenced by the Biden Administration’s recent executive order to that effect.
“The rhetoric is there,” says Eshkenazi. “Do we have the wherewithal to back it up with action? The challenge is implementing a lot of what we know are appropriate solutions in supply-chain practice.”
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