Ripple Effect of Corona Virus and its impacts on Enterprise Supply Chain
The far-reaching global impact and the inevitable ripple effect of a natural or human inflicted disaster on the world of business.
by SavileRoh
I’m sitting at my desk, as my colleagues discuss our supply chain technology with a potential client. These moments allow me the time to postulate on recent events, specifically the impact that the coronavirus has had on international business operations.
It’s no laughing matter, to anyone. Stocks are plummeting, some people are preparing for doomsday, which benefits some companies, namely Costco. But it’s not the first time a disaster has had this type of a global effect on business.
One would think that after the typhoon in Taiwan that wiped out manufacturing in the semiconductor industry, for example, that it would have urged the people in charge of the supply chain to re-think their position.
There are several other events that I can list, but you get the idea. The answer is ‘sort of’. They adopted some techniques to soften the blow. Or at least the big-timers did. Most of them tried to have multiple sources for the same material, component, or whatever part they needed to build their product.
Still, not all companies could afford this luxury.
1.) Single Source vs. Multi Supplier and Multi Geographically Sourced
There is a trickle-down effect anytime something like this happens. It affects the source of materials that are needed to build semiconductors in the first place.
If you have been selling bespoke jackets that are composed of merino wool and a silk Donegal blend, you better have multiple sources for those fabrics, because something like the coronavirus could screw the entire game up. Especially if you have a very particular head designer.
Once upon a time, there was an incident that caused the Ford Motor Company to shut down. To stop their conveyor belts. Dead in their tracks.
Now, many of you may have forgotten, but remember those cigarette lighters that would come in your car? (My MINI Cooper still has one actually.)
Well, Ford had a manufacturing plant in Mexico that would make these for each Ford car. A very small component in the grand scheme of things eh?
Well, hold the front door.
Something happened at the manufacturing facility in Mexico that caused the workers to go on strike. Suddenly, Ford, famous for its conveyor belt, and the ability to churn out motor vehicles seemingly non-stop had to shut down, because they were missing one small component, which in hindsight, to me, is laughable. And that component was a simple cigarette lighter.
It’s easy, now, to say they drove their proverbial tire into this pothole by siloing the development of this particular component to one source. But until you get punched in the mouth, you often forget that you are primarily made out of solid bone, which will break.
Having one or even two sources, in one geographic area, for any component in your supply chain is a recipe for eventual disaster. You may be smooth sailing, but what happens when the current turns. You must be ready.
Not unlike our beloved first responders. What do first responders do? They practice, practice and practice some more, so when the real deal is in front of them, they know the drill and how to mitigate the issue. Which leads us to number 2.
2.) Scenario Planning
At Boardwalktech, we encourage companies to do this. We even develop programs to digitize this process for companies so that they can have predictive analytics and ultimately become more agile when operating their supply chain.
We call it “scenario planning”.
We do this by setting up programs that will be running through the ripple effect of test scenarios like; “What happens to our supply chain if the big California Earthquake hits” to more fringe cases like what is happening now.
Nothing ever stays the same during a disaster. It’s constantly changing, which is why it’s important for us to digitize these scenarios, and retrieve as much as information as possible, before it happens, while it is happening and in the aftermath. Then make sense of this information and apply it to the next iteration. So as the virus evolves, we, too, are evolving.
The global supply chain is constantly in flux. Even Costco has to figure out just how much inventory to buy, as the doomsday masses come into to stockpile on goods, so they do not have to leave their home. What are the ramifications of just a few of Costco’s supply lines getting cut off because of this virus? What is the ripple effect of people staying indoors? The answer is unfathomable. Every industry is hit by something like this.
But hey, plane flights are much cheaper, if you are looking for a silver lining.
The cancellation of South by Southwest hit home for me. A favorite event of mine. The effect is going to have a tremendously negative impact on some of the most vulnerable and creative members of our society, like musicians, photographers, videographers, designers, sound and audio engineers. Many, if not all of whom are linked, from fashion to audio-syncs and movies to concerts to podcasts.
Heavy ramifications. One virus. Thousands of events canceled. Poorly mitigated supply chains. Millions of professionals without a spotlight job. A job they had been preparing for years I imagine.
Even when things are relatively smooth, there are random disruptions in the supply chain. It’s why I mentioned the Ford Motor Company example. Because there was no big catastrophe, except for some factory workers going on strike.
If the supply chain is in constant flux, then communication along the supply chain should be lightning-quick and second nature. Unfortunately, it isn’t. Even today, it is one of the most glaring examples of the lack of execution, even after all the scenario planning.
Lots of chatter lately about S&OP and S&OE. Scenario planning can be compared to S&OP. The planning part. And then some person, likely sick of the lack of execution after all of the meticulous planning, came along and preached S&OE. Now a common buzzword and a necessity.
There are other ancillary benefits of having multiple sources from multiple geolocations that can actually play into your advantage. You can A / B test a good many things. Harris Tweed comes from Scotland, but there are other great weavers of tweed. And these weavers surely have a strong skill set, brand recognition, and a story to tell. They may not have a fancy orb, with protection from the government, but at the end of the day, it is tweed.
Anybody in the business world knows how much time is spent on planning. Planning, planning, and planning some more. It’s similar to a sports team practicing but at some point, you need to get on the field, the court, or the ice and actually execute. If you don’t execute, then everything else is moot, isn’t it?
That is where rapid communication comes into play.
3.) Rapid Communication
Rapid communication leads to better supply chain management and thus overall increased business agility.
Now, for example, with the Coronavirus in full swing, you have a load of supplies coming from an airport that is no longer functioning. What happens? How do you handle it? Well, spreading out your geography certainly helps. But then comes the issue of resources. Some geographic locations just don’t produce certain things.
It is because of these nuances that I encourage you to really think about 2 while implementing 3 because the two go hand in hand.
How does one go about implementing rapid communication in a supply chain? Well, by leveraging technology and common sense. If you are looking for a solution in a box, ping me at roh.krishnan@boardwalktech.com, and I’d be happy to have a conversation.
But at the end of the day, the game is in the name. Communication. Integrate communication lines across your entire supply chain so that when something changes, you can quickly relay that information to the next entity on the line.
Think about a baseball game. The manager is constantly communicating what he sees on the field to his players. On offence and defence. Even more complex is the NFL, where you have one guy up top, with a birds-eye view of the field and a headset so he can convey what he sees to the head coach or offensive / defensive coordinators.
Boardwalk covers this seamlessly, as I’ve come witness during my days here. From beer to computer chips to AR headsets to insurance to healthcare to a bespoke jacket.
A Harris Tweed jacket, with the word ‘Harris’ in front of the Tweed, automatically silos all production of Harris Tweed fiber to Scotland, and not just anywhere in Scotland, but the isle of the Outer Hebrides.
One can do without a jacket in times like these, so take that same principle and apply it to a verticle like healthcare, where suddenly patients are unable to access vital prescriptions when they likely need it most.
It also was just stated in Santa Clara County, the heart of the Silicon Valley, that events with a 1000 people or more are not allowed. Suddenly now, professional teams like the San Jose Sharks and San Jose Earthquakes are going to be playing in front of empty stadiums — if playing at all.
It seems almost brain-dead common sense to mention seamless communication. I mean, a company called Slack is now public and making headwinds, especially during the Coronavirus when many people are forced to work remotely.
I bring up Slack because if you strip away all the integrations, Slack is fundamentally a communication tool for businesses, groups, and communities.
It does a great job when one is collaborating over a project or sharing a file but it doesn’t operate an entire supply chain for big-time companies whose entire business relies on a proper supply chain.
These companies always seem to be ahead of the game, but how did they have the foresight to do this?
Well, it is with pride that I can say that Boardwalktech’s Digital Ledger supply chain and Network of Words (NOW) technology is utilized by a number of fortune 500 companies. Perhaps this is one of the reasons they aren’t being hit so hard. Or at least so it seems.
These companies keep everything so close to the chest and for many, I simply am not in a position to explicitly say, so it’s hard to really convey the impact. But I have a hunch.
4.) Solution
The solution to you, should at this point be self-evident. Simply, take steps 1 through 3 and digitize those processes so you are constantly getting insight into the ebbs and flows of your supply chain.
“Simply”. “Famous last words”, as my colleague JB often says.
It is precisely because it is not simple that I previously encouraged you to reach out to me. Each company, including yours, has unique nuances that make your supply chain different from any other entity.
Now, one should be thinking about this at all times and this should occur in times when there is no virus or devastating event, but when times are smooth sailing and life is good.
What you should have, is a collaborative and continuously connected supply chain that has the capability to flex when ripple effects hit your company.
Say that 5 times and then try to “simply” digitize these processes.
Or ping me at roh.krishnan@boardwalktech.com
Stay Healthy Friends,