Supply Chain Guru Prof. Richard Wilding explains supply chain challenges during COVID-19
One of the world’s leading logistics experts gives his assessment of how COVID-19 has impacted the interconnected world of demand and supply.
Professor Richard Wilding has spent a long and illustrious career talking about the vital importance of supply chains. Sometimes he can be a voice shouting in the wilderness, particularly where the general public is concerned. “It’s as though some people think goods magically appear on supermarket shelves,” he says. “Now, because of the coronavirus, they realize there’s a lot of science, technology and people behind that magic.”
Currently professor of Supply Chain Strategy at Cranfield University in the U.K., Wilding is recognized as one of the world’s leading logistics and supply-chain gurus. As businesses try to protect themselves from the impact of the coronavirus, his expertise has never been more in demand – or more essential.
From a supply chain perspective, is there any event in recent history to compare with the disruption caused by COVID-19?
The one everyone makes is with the 1918 flu pandemic. The difference is that the First World War was going on at the same time – but, in terms of total global disruption, you could argue that it’s similar.
We’ve also had two fuel crises in the U.K. last 20 years: one in 2000 and – to a lesser extent – another in 2012. What the 2000 fuel crisis did was open people’s eyes to possible supply-chain disruption. The big supermarkets began putting teams together to manage this challenge because they suddenly realized that, without fuel, various parts of their operation would shut down.
And, of course, 9/11 shut down all air freight, which is similar to what’s been happening today with COVID-19. Remember, airplanes don’t just store bags in the hold, they also store cargo – so, with airlines grounding many aircraft, air freight has been severely disrupted in some areas. But, yes, overall, this is an unprecedented situation.
What kind of supply disruptions are we seeing due to the pandemic?
For example, shipping containers are in the wrong place. One analogy would be a supermarket which has all its trolleys by the door. The problem is that, when the customers have used those trolleys, they leave them at the outer reaches of the car park – so you need to have a system to bring them back. That’s what’s happened with shipping containers: they’ve been left in different locations across the world. I was talking to a company the other day that couldn’t find refrigerated containers anywhere.
Then there are issues with warehousing. Warehouses are filling up because their outflows have reduced. Ultimately this could result in that, when cargo arrives at port, warehouses can’t take it because they’re full, so the ports fill up with lots of containers. This means cargo boats can’t unload, so these are sitting out in the ocean waiting to come in. It’s an illustration that this is a complex, inter-related system. I think we’re going to see more challenges like this if the lockdown continues for a substantial amount of time.
Have supply chains coped better or worse than expected?
It depends. I’d argue that those organizations that have been hit by significant disruption in the past have planned pro-actively and been able to deal with things more effectively. They’re continually running stress-test scenarios and, as a result, have very good supply chain transparency and monitoring. In short, supply-chain resilience has become part of their business culture.
I have been surprised by some businesses, such as a big blue-chip company that contacted me to ask: “What do we do?!” The problem is that a generation of supply chain professionals in their organization don’t have, within their memory, the techniques and approaches that can be used to deal with this type of challenge.
Are there sectors that have been coping well?
Automotive is having a desperate time, as we all know; but, interestingly, it’s a sector that knows what to do in this type of situation. Automotive companies generally understand the approaches they need to take – and they understand their capabilities, too. That’s key, actually. For example, if you’re a brewer, you have the capability to put liquids into bottles. So maybe you can switch to putting hand sanitizer into bottles, as U.K. brewer BrewDog has done. If you make circuit boards, maybe you can make them for another industry: healthcare, for example. If you’re clear on your capabilities, you can do some really interesting things.
What supply chain trends have you noticed during the pandemic?
We’ve found that panic-buying of particular products is different in different countries. For example, in France, stockpiling of toilet rolls doesn’t seem to have occurred – but it’s been a national obsession in the U.K. and Australia. We’ve also seen many big manufacturers doing a lot of range rationalization and reduction in complexity. This means, you may notice that your supermarket has gone from stocking 20 different varieties of pasta to just seven. Reducing complexity like this is better for capacity because manufacturers don’t have to carry out changeovers to machinery, etc., during production and are therefore able to make more goods. It also simplifies the shipping process and helps get things through the supply chain and onto the shelves.
Will current supply chains be able to quickly return to normal, post-COVID-19?
It will take a while for supply chains to rebalance because we’ve had a massive shock to the system. There are those problems with containers and warehouses that I mentioned, for instance – although I think certain ones will be able to resurrect themselves relatively quickly. There will be other issues, too. Demand for home delivery has rocketed, but I would argue that the majority of supermarkets are losing money on it. That stands to reason, because if they’re only charging a few pounds for home delivery, it’ll destroy their margins. So the big challenge retailers will have to face is reflecting on the costs they incur while serving their customers, and understanding how the supply chain interacts with their overall finances.
What changes will companies make when designing their supply chains, post-coronavirus?
I think we’ll see some big changes, such as procurement for resilience rather than cost. That might include looking for near-shoring opportunities and asking if they really need to buy products from the furthest corners of the world. Also, can they manufacture with a smaller footprint? And can they use additive manufacturing 3D-printing technology positioned close to the market so there’s less chance of disruption? These types of things are happening anyway, but COVID-19 will accelerate it. Society will have to adapt, too. For example, if a company can work out a way to make its supply chain more resilient, but does so using more automation and fewer people, then that has big implications for employment. So this is a big, complex problem that we’re going to have to deal with. ― Tony Greenway
Published: April 2020
Image: Cranfield University