Is corona a wakeup call for the supply chain?

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Over the past month, the attention that logistics and supply chain management has received in the mainstream media has been unprecedented. Once it became clear that Apple’s decision last year to single-source their manufacturing in China would lead to a shortage of iPhones on the shelf, it was headline news. It must be encouraging for all supply chain professionals that topics like inventories, lead-times, available containers, and worker and component shortages are suddenly receiving so much attention. Usually our profession goes unnoticed, since we do everything in our power to avoid precisely these problems.

However, the real question is whether we should have been better prepared, and whether our current response is a demonstration of incompetence rather than competence. As an academic observer, I am constantly surprised by the lack of risk awareness in the supply chain. In each and every logistics class held in the past 50 years, we have taught students that a dual-sourcing strategy is usually preferable to a single-sourcing strategy if we take all costs into account. And our finance classes stress the need to account for operational risk. However, once they’re in the field, many professionals tend to forget the basics they learned. Moreover, many professionals demand that basic theoretical insights be removed from their programs, because they would rather learn “tips and tricks” on how to respond in times of crisis. Maybe showing that our profession matters at such moments can be a source of satisfaction.

One of the supply chain directors that I admire most once said: “the best planner is a lazy planner,” i.e., one who has prepared for difficult times, designed her supply chain accordingly, and has positioned inventories at the right places to be ready for the unexpected. Sometimes managers forget that if a planner doesn’t look busy, it’s actually a sign that she’s doing the best possible job, and she should be rewarded for it. Some proper offline modeling can also help professionals prepare for the next phase in the corona crisis, namely a bullwhip that will likely continue to cause imbalances in many supply chains over the next 12-16 months. I can only hope that the crisis is a wakeup call for all executives that proper preparation based on solid and proven knowledge requires an investment in people, resources, and good theory. KLU is there to help you.

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Corona Crisis: Analyses & Comments
This article by Prof. Jan Fransoo is part of our series of analyses & comments of our KLU researchers regarding different aspects of the effects of the ongoing coronacrisis on our daily lifes, the economy, our way we work and more. www.the-klu.org/corona