By: Mark Layton – March 23, 2020
(Image (C) Gettyimages Creator: Thomas Vogel. No copyright infringement intended)
Having now surpassed over 35 years of experience working in the Supply Chain field, one great asset I have amassed is an awesome and well connected global network of other Supply Chain executives and leaders. This past weekend I began polling a large number of my connections and asked them to respond back to me about their current experiences, specifically related to the COVID-19 outbreak, on these topics:
Could I ask you to give me some comments on both the current situation and also your plans to address, each of the topics noted below, specifically related to the COVID-19 pandemic?
- Overall business activity
- Product Availability
- Process and/or facility changes specific to the virus (things like cleaning and sanitation)
For the purposes of confidentiality, I am not using company names, but for context purposes the reader should understand that these comments are derived from supply chain executives or directors at large and global firms in the segments of transportation, distribution and consulting.
The following are summary snipets intended to help executives quickly find items of interest and value for their own operations. I will update this blog periodically over the coming weeks.
Overall Business Activities
Results to this question varied by sector. Healthcare, Food and grocery has been very active. Some tech lines are very active while others have slowed. New business prospecting has slowed as RFP’s have been delayed. Hospitality and tourism segments report being virtually shuttered.
Challenges prevail in predicting and servicing demand as several businesses have seen significant shifts in demand across varying customer channels and/or products.
For example in food service, commercial restaurant demand, particularly in hospitality, is generally down while retail grocery demand is up. While there may actually be plenty of paper towels in the market, they may not be properly packaged for the shifting demand across a suppliers customer channels. Some manufacturers/suppliers are modifying or re-packaging to address this issue.
Product wise, demand for things like “to go” packaging is up markedly in the restaurant channel and these supplies are likely deteriorating quickly given the large increase in demand. This is likely to ripple into the retail grocery segment as restaurant owners, scrambling for their livelihoods, find alternative “to-go” packaging products, like paper plates, to be able to service their clientele.
Prioritization of orders for critical customer or product segments is being widely implemented at the expense of maintaining overall service level KPI’s. It’s particularly frustrating when customers can see via their supply chain visibility tools that products are available at various suppliers, yet orders placed for those products don’t move due to uncertainty surrounding prioritization practices. As such demand planners will face difficult challenges in the monitoring of their supply chains as service level norms and expectations are generally “out the window” for the time being.
Key takeaway – Demand planners need to be thinking “cause and effect” as they see changes in demand occur across channels and products. Planners can get out ahead if they can foresee how businesses and consumers might adapt as shortages arise in different products. e.g. Cause… hand sanitizing wipes sell out, effect … demand for baby wipes goes up. Suppliers can do a great service to their downstream customers by clearly communicating prioritization rules and how it will impact service level expectations across channels and products and throughout their supply chain.
Generally, all of the responding supply chain executives I have spoken with are indicating that they are experiencing labor shortages. These shortages are reported from a variety of causes including; local geography “shelter in” orders; increased caution by workers to avoid people and workplaces for even minor illness that is resulting in greater absentee rates; extra staff requirements due to sanitation and cleaning efforts; reduced productivity levels related to process requirements around social distancing and personal hygiene and protection precautions. To immediately combat labor shortages, several firms reported extensive use of voluntary overtime hours for the workers willing to accept the work.
While labor demand in supply chain centric industries is up, for example, Walmart, Amazon, Kroger, Target and many others are all advertising open positions for hundreds of thousands of needed workers. However, hospitality, tourism, automotive sales and other service industries are definitely shuttering staff.
Key Takeaway – HR Managers need to be “thinking outside the box” in terms of adapting where and how they are recruiting staff in order to center-in on the huge numbers of displaced workers in the down industry segments. There may be a silver lining in this labor phenom that could be good news for our country economically, in that there are JOBS out there to be had. Grocers, transportation providers, distributors, manufacturers universally seem to be looking for a large number workers and they may be able to absorb much of the displaced workforce from the down industry segments.
International air cargo lift capacity has diminished dramatically as passenger transport carriers temporarily shutter international routes and “park” their planes. Particularly from Europe and to a lesser degree from Asia, “belly cargo” on passenger routes provided much of the air cargo lift capacity. As such, given diminished supply, air cargo rates are up significantly. This is likely to result in supply disruption and/or inflationary pricing for things like cell phones, electronic components, seafood and other product segments heavily reliant on air transportation.
Domestic ground transport continues to operate generally well, but increasing demand on small package movement, combined with productivity impacts due to social distancing and other personal hygiene requirements are likely to put a strain on the domestic ground transportation network that may result in increasing transport lead times.
Key Takeaway – Demand planners should immediately consider adding several days/weeks to their targeted safety stock levels as these transportation issues will continue to permeate and worsen the longer the crisis continues.
Clearly sanitation products and other items required in the response for the national healthcare crisis related to the virus, are in very limited supplies due to the sharp increase in demand. The federal government has been aggressive in its efforts to encourage manufacturers, with specific capabilities, to quickly increase manufacturing capacity of these badly needed products. From my conversations, I expect it will be several weeks (5 to 10) before meaningful production increases are available to begin to allay this issue.
Shortages consumers are experiencing in other products, like toilet paper and paper towels, pasta and canned goods, are generally attributable to the “hoarding phenomena”. Because these products are “staples” and have historically had very level and predictable demand rates, manufacturers have limited ability to scale production to address this artificial demand increase.
Inbound supply chain activity from China is reported to be returning to some semblance of normality as the crisis in China has diminished. Executives are reporting that they expect about 4-6 more weeks of inconsistent supply and before inbound fill rates reach the mid to upper 90% percentile.
Supply chain executives are also reporting a sharp increase in undeliverable package returns due to the large numbers of businesses who were forced to close due to local “shutter in place” directives.
Key Takeaway – Stop hoarding! Supplies for most products will be readily available if business and individual consumers take a calm and evenly paced approach to restocking. Consider more frequent visits to your local grocery or other product supplier with smaller purchase amounts. Ask yourself, do you really need 50 cans of corn in the pantry?
Process and Facility Changes
Universally, supply chain executives have commented that this is the area where the greatest changes have been implemented. More frequent cleaning and multiple times daily sanitizing of all equipment (RF guns, work surfaces, restrooms, fork and hand trucks and more). Changes to; the locations of time clocks to separate them to 6′ distances; removing some break room tables; staggering rest and lunch breaks; adjusting work stations to meet social distancing requirements; changing processes, for example in trailer loading and offloading, and monitoring ingress and egress points during breaks and shift changes to insure staff members are always safely distanced. Body temperature monitoring is also being implemented at all ingress points in many facilities. All these activities are centered around the goal to insure a safe workplace for staff members and to prevent an outbreak of the virus in a company’s facility that would effectively shut the facility down for an extended period.
Some executives are also reporting the implementation of electrostatic disinfection tools utilizing hospital-grade chemicals. Electrostatic spraying is the process of applying an electrically charged disinfectant solution onto a desired surface. Since it is electrically charged, it is able to wrap around all areas of the surface efficiently, as its bond is stronger than gravity. This spraying system is fast and the process allows the disinfectant to reach the hardest areas possible such as conveyor lines, storage racks, material handling equipment, workstations, and all of the crevices where viruses can thrive.
Key Takeaway – Sanitation, disinfection, close staff monitoring, facility reorganization and appropriate “distancing” practices are critical practices necessary for essential supply chain businesses to be able to to continue to operate in this COVID-19 environment.