Are You Prepared to Manage a Whack-A-Mole Recovery?

Pressure to reopen the world's economies is intensifying. However, hasty reopenings will likely spur waves of resurging infections in location after location, followed by more closures and quarantines.

Global economic recovery after the pandemic-imposed shutdown, therefore, is not likely to be V-shaped, U-shaped, L-shaped, or W-shaped. Instead, as the number of infections, hospital admissions, and deaths cycles up and down, chaotic cycles of economic rebirth and relapse will plague businesses and their supply chains.

Businesses face a game of global whack-a-mole, as the COVID-19 virus rears its head or subsides in the cities, states, and countries that host the far-flung supply chains on which companies rely.

The need for speed and agility

How do companies forecast and plan for such chaos?

Unfortunately, the conventional approaches of “demand forecasting,” and “production planning” don't work. Since no one has relevant historical sales data on the current situation, supply chains designed for making deliveries to institutions and restaurants cannot adapt quickly for retail deliveries, which must meet different product quality, packaging, and other standards. Also, it is difficult to forecast which suppliers will have the required capacity at all times.

Given these constraints, the words of General Dwight Eisenhower ring true: “Plans are useless, but planning is indispensable.” Planning during the next several months should focus on preparing to react flexibly and quickly to changing circumstances.

Mapping and sensing are key

When planning for supply chain disruptions, possibly the most important preparatory step is a thorough mapping of the company's supply chain. Such mapping goes beyond identifying the company's suppliers. It must also determine the physical locations of the suppliers' plants and warehouses (not just the administrative locations typically stored in ERP systems). Once a company documents all of these facility locations, it should use the bill-of-materials (BOM) of the company's products to identify which products might be affected by a shutdown at each supplier location.

For a large and complex enterprise with thousands of suppliers around the globe, mapping is a massive exercise that cannot be done on the fly. Fortunately, specialist companies such as Resilinc have emerged in recent years to provide supply chain mapping services. For industries in which an expert has mapped the supply chains of a few OEMs, mapping a new one is relatively quick because companies in the same industry often use many of the same suppliers.

After a business knows its supply chain map and its exposures to different supplier locations, the next order of business is “sensing” – discovering as early as possible where rebounding infections might provoke a near-term shutdown. These investigations include being aware of suppliers' HR practices that might force a facility shutdown, as in the case of the Smithfield pork processing plant in South Dakota, which closed recently due to poor social distancing and inadequate worker protection.

Sensing requires information from non-traditional sources, such as eyes-on-the-ground in hospitals, as well as tracking social media postings around the world. Although maintaining contact with local governments may be important, the COVID-19 crisis has shown that governments might downplay the problem to avoid panic rather than distribute candid information.

Acquire logistics services quickly

Once the company spots a problem area, it should react with urgency. The first action is to assess existing inventories of affected parts and products and compare them to the expected length of the shutdown. At the same time, check the capacity at alternative suppliers in other less-affected regions. The second action – assuming that the expected closure will exhaust the available inventory – is to move supplies of parts and material from the affected area to alternative sites. If the closure is expected to be long, the company may decide to move finished goods as well.

To relocate parts, material, and finished product inventory, the company should secure the logistics capacity – especially transportation – it needs to move the goods out of the affected area.

These analyses and decisions should be executed quickly before other companies lay claim to outbound logistics capacity. A new level of flexibility has become available in the last few years from service providers such as Flexe. These providers offer on-demand warehousing capacity, allowing companies to establish a temporary presence in a region without the need to commit to brick-and-mortar facilities. Note that because a pandemic will affect all enterprises trading with the region, companies will face significant competition for logistics capacity from all business sectors.

Set up response teams

To manage fluctuating supply and demand at speed, leading companies set up “tiger teams” in critical regions around the world. First and foremost, these teams act as listening posts and quick reaction forces. Such teams are coordinated by (now virtual) emergency operations centers (EOC) with decision making authority.

EOCs are commonly used by large corporations to respond to “normal” disruptions, such as hurricanes, floods, earthquakes, and the like. In contrast, the COVID-19 disruption is global, likely shifting unpredictably around the world, and probably long in duration. Consequently, emergency operations for the pandemic need to be manned by a larger crew of dedicated personnel as compared to the temporary staffing used during natural disasters. Most importantly, the EOCs must be manned 24/7. They should be responsible for collecting data and coordinating operations continuously as daytime and events move around the world, and have the authority to act quickly when warranted.

Manage the moles

By mapping, monitoring, and moving quickly, companies can better handle a whack-a-mole recovery in which many of the moles are big problems, but some are opportunities.

Dr. Yossi Sheffi is a professor at the Massachusetts Institute of Technology, where he serves as Director of the MIT Center for Transportation and Logistics (MIT CTL). He is an expert in systems optimization, risk analysis, and supply chain management, which are the subjects he teaches and researches at MIT.

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