By Dr. Mohammed Khurrum Bhutta
In recent months business commentators have extolled the importance of good leadership in this time of national and global crisis. Leadership, however, is a broad topic with a vast range of possible focal points. What does good leadership in the time of COVID-19 actually look like? It could mean keeping one’s employees safe and providing them with adequate compensation and benefits. It could mean clearly communicating work-related expectations, particularly with the widespread move to remote work. Or it could mean inspiring employees with a shared sense of purpose and meaning in this time of uncertainty.
Since my background lies in operations and supply chain management, I would have to address the topic from that perspective. Good leadership in operations is all about creating value. Companies provide value by creating products that can meet the wants and needs of consumers—meaning it is not enough to have good ideas and companies must be able to translate those ideas into something consumers can make use of and are willing to pay for. Further, “value” refers to not just the value that the products themselves provide but the ability of the company to consistently design, produce, and deliver those products into the hands of consumers via supply chain management. This value is diminished if there are significant disruptions to the product flow, and a memorable example of such a disruption is the shortage of consumer-grade toilet paper in the early weeks of the COVID-19 pandemic.
One thing we know about the COVID-caused product shortages is that they were not caused by panic buying alone. Rather, there were flaws and weaknesses intrinsic to the supply chains that made them vulnerable to the sudden shifts in demand. Chief among these weaknesses is the industry’s underlying assumption that demand for their products will always follow their forecasts. These forecasts are often based on historical trends and do not incorporate future trends. The supply chain strategy for many of these products were simply not designed to accommodate fluctuating demands.
Supply Chain Risk Management for Risky Times
Since part of the value that companies provide lies not just in their products but in their ability to consistently deliver those products, good leadership during COVID-19 must entail supply chain risk assessment and management. Unfortunately, part of the reason many companies failed to plan for COVID-19 is that there has not been anything on the scale of this event in recent times whether man-made or natural (perhaps the last such event was World War II). Even 9/11 and Hurricane Katrina, though both were highly disastrous, were nevertheless regional events. In contrast, with COVID-19 it is not just the entire nation that has been affected but the entire world, and there is no aspect of people’s lives that has been untouched. With no comparable precedence, most companies were just not able to conceive of, much less prepare for, an event of this magnitude.
Unfortunately, scientists predict that COVID-19 will not be the last pandemic, and it seems that natural disasters in general are becoming more common. It therefore behooves company leaders to analyze their supply chains for risks and vulnerabilities, and to put measures in place to prepare for future disruptions both natural and man-made. Of course, this is easier said than done. For most companies, it’s all they can do right now to just stay afloat. But good supply chain leadership during COVID-19 is not just about present survival. It is also about ensuring future survival.
Identifying risk and vulnerabilities in a company’s supply chain does not have to mean changing one’s supply chain strategy completely if a pre-existing strategy had been working well for them. For instance, if a company has selected to have a supply from a distant part of the world, they shouldn’t have to change that just because of the pandemic. One event, no matter how severe, cannot and should not dictate a company’s supply chain strategy. Rather, the company should identify backup suppliers and put a contingency plan in place to deal with such events. This ensures that the supply chain is more agile and resilient to future disruptions. Moreover, once contingency plans are created, they should not just sit and collect dust. They should be periodically tested, reassessed, and if necessary revised.
This may strike many business owners as obvious, but I work with small-to-medium-sized companies—not necessarily the Walmarts’ of the world but the ones that produce for the Walmarts—and I am continually surprised by how few companies actually think about or practice these basic principles. From the big picture view, this is tremendously risky for not just these businesses individually but for the entire American economy. Small businesses make up the majority of American businesses and 48 percent of all U.S. employees work for small businesses. Tragically, small businesses have been hit hard by the pandemic, and anywhere from 1.4 to 2.1 million small businesses could shut down permanently as a result of the first four months of the pandemic. Their survival is therefore key to the economy’s recovery, and the key to their survival, as I have argued, is supply chain risk management.
Preventing Supply Chain Disruption Amnesia
Even business owners who agree with all this may still wonder how to feasibly go about assessing and planning supply chain risk management, especially when their focus right now is simply on surviving. I would respond to this in two ways.
First, since every company’s situation is unique, there is no way to prescribe a universal formula or remedy. The best risk management strategy for any given company depends on an array of factors including their specific industry and current supply chain structure. It would be helpful for companies to research their industry, enumerate their top risks, and list out contingencies should those risks materialize. Industry associations are an excellent starting point and so is the internet. Typing in one’s industry along with the keywords “supply chain risk” would yield numerous resources.
Next, it’s completely understandable that small business owners’ time and energy right now should go into keeping their businesses afloat. The important thing is that they don’t indefinitely put off analyzing their supply chain strategy for risks. Unfortunately, being human many of us will focus on present issues and put off long-term planning. In the area of supply chains, Tompkins International’s Thompson Brockmann calls this tendency “supply chain disruption amnesia.” Once the most immediate and urgent dangers of COVID-19 are behind us, many will inevitably return to a business-as-usual mindset. Still, if there’s one lesson that this pandemic will hopefully have taught business owners it’s that they cannot afford, both literally and figuratively, to wait for the next crisis to come along.
Often, I say to my students in the Online Master of Science in Management program that it sometimes takes just one lecture or course to provide an insight you have been searching for. This one insight can open doors to changes in yourself or your professional career. It makes the entire program of study worthwhile, and if my students go further and take constructive action as a result of an insight, then they will have gotten more than their tuition’s worth. In the same way, if all this article does is serve as a reminder to business owners that supply chain risk assessment is something they simply must do—both for their own sakes and for the sake of the economy as a whole—then reading it will have been well worth their time.