Adapted from The New (Ab)Normal: Reshaping Business and Supply Chain Strategy Beyond Covid-19. Copyright (c) 2020 by Yossi Sheffi. Used with permission of the publisher, MIT CTL Media Cambridge, Mass. All rights reserved.
The OECD Forum Network is a space for experts and thought leaders—from around the world and all parts of society— to discuss and develop solutions now and for the future. Aiming to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge, opinions expressed do not necessarily represent the views of the OECD.
Before the pandemic, when people asked my wife what I did, her reply about my work on supply chains confused them. The average person was simply unaware of the vast global web of manufacturing, warehousing, and transportation companies that bring a wealth of consumer products to the nearest store shelf or front doorstep.
At some level, that lack of awareness is a testament to how well these supply chains usually function: The fact that the goods people wanted were almost always sitting on the store shelf when they wanted them made it easy to take for granted all the hard work it took to put them there. When the virus simultaneously disrupted suppliers, operations, and consumer demand, everyone became acutely aware of the existence of supply chains and how they were straining to cope with the challenge. My wife did not have to explain anymore. […]
The Digital Cannot Exist Without the Physical
Despite the push to make everything digital, much of the world and daily life remains physical. The food we eat, the clothes we wear, the medicines we take, the home appliances we use, the vehicles we drive, and so on all depend on physical products made from physical materials that are physically moved and delivered, often over long distances. There’s no app that could ever replace toilet paper, but there are apps to help us find scarce supplies of it.
Covid-19 made clear we cannot simply turn off the economy and all shelter in place. Someone somewhere must still make and deliver the daily necessities (and luxuries) of life. Someone somewhere must still make and deliver the huge volumes of healthcare-related supplies required to treat the sick and prevent the uncontrolled spread of the disease. Civilization depends on supply chains to convert the bounty of the planet into the products we need and then deliver those products to 7.8 billion human beings at a price they can afford. When a virus, a government edict, or a recession hits hard, it tests the people and processes that keep the physical side of civilization running. […]
Learn more about efficiency and risks in global supply chains with the OECD policy brief "Global value chains: Efficiency and risks in the context of COVID-19"
The Future: A New Roaring ’20s?
What was clear in the research and interviews [I conducted for my book The New (Ab)Normal: Reshaping Business and Supply Chain Strategy Beyond Covid-19] was the core role of flexibility and agility in managing both the chaos of early 2020 and the pivot toward the changed future. Supply chains may have been strained to the breaking point by both the contagion of the virus and the contagion of breathless media messages that fomented consumer panic. However, many companies and their supply chains really did rise to the occasion to make masks, sanitizer, ventilators, and a host of sought-after and hoarded consumer products. Despite an unprecedented upheaval in the structure and quantities of the demand for food, the food supply chain held.
Covid-19 proved that we are all dependent on each other. That revelation scared some toward trying to retreat into a fantasy world of total self-sufficiency. In contrast, those familiar with supply chains knew the potential power of all the interconnecting pieces to do almost anything if one connected the right pieces and synchronized their activities. Thus, all those interdependencies provide an unparalleled opportunity to serve the needs of humanity even when those needs shift dramatically. Ultimately, companies can improve how they create, nurture, and manage these interdependencies (i.e., supply chains) in order to thrive. […]
Building a Stronger Flexible Web of Connections
As seductive as self-reliance seems, it is an all-eggs-in-one-basket strategy. Relying entirely on domestic production to serve domestic consumption fails if production is closed by a pandemic (or other disruption), or if consumers’ wallets are closed by recession. In a world in which resurgent disease and political whims can make any country an unreliable supplier or a fickle customer, companies must diversify their suppliers and their customers. That means striving for more (and better) connections, not fewer.
Many of the trends accelerated by Covid-19 are rooted in improvements in connectivity and its utilization. IoT connects people to data about distant things. Cloud computing connects people and companies to data storage, applications, and computing power. Mobile devices, video teleconferencing, and collaboration apps connect people to people anywhere at any time. Supply chain visibility and transparency connect companies to other companies around the globe. E-commerce and omnichannel retail connect consumers to distant and local retailers. Technological platforms enable people and companies to easily access needed resources or services as well as offer their resources to others.
Thus, the true lesson from Covid-19 is in the emerging opportunities for companies to grow and improve connections. These connections give companies a deeper understanding of their suppliers (and suppliers of suppliers) and customers. The connections enable visibility, remote management, working from home, buying from anywhere, and selling to anywhere. And fast, better connections foster the flexibility and agility companies need to deal with disrupted supply, disrupted demand, and hoarding, and to capture long-term, global opportunities. Although Covid-19 may have exposed the fragile links lurking in the global economy, it also accelerated adoption of a great many technologies and practices that will make the global economy more robust over time.
Read the full book The New (Ab)Normal: Reshaping Business and Supply Chain Strategy Beyond Covid-19.