Planning for supply chains that can function well in this environment is very expensive. The first alliance to accelerate digital inclusion, Why refugees need a better chance at professional development, 5 reasons why the G20 needs a sustainable blue economy. Reduction in the number of SKUs (stock keeping units) that many retailers offer. By acting intentionally today and over the next several months, companies and governments can emerge from this crisis better prepared for the next one. COVID-19: Implications for Supply Chain Management - PubMed Identifying the Impact of Supply Chain Disruption Caused by COVID-19 on Toilet paper is bulky to store, and demand is ordinarily very stable, which led retailers to keep only two to three weeks of sales in inventory and manufacturers to operate their plants at 92-percent capacity. The manufacturing base simply isnt set up for it, nor should it be, because in a regular time, it doesnt make sense to have such overproduction of these particular items. These practices were subsequently embraced by innumerable industries to achieve the same economic benefits. And who can forget the Ever Given saga, in which a mammoth cargo ship blocked the Suez Canal, stranding 400 vessels and holding $9 billion in global trade hostage each day? There were a variety of factors that led to the health care supply chains' slow response to the COVID-19 emergency. Relationships between supply chain partners must evolve. Its time to adopt a new vision suitable to the realities of the new eraone that still leverages the capabilities that reside around the world but also improves resilience and reduces the risks from future disruptions that are certain to occur. These include: Port chokepoints and trucking bottlenecks that slowed down deliveries of critical supplies; Not having enough workers to produce and transport products because workers were out sick or were not showing up to work; A triaging process that prioritizes customers by strategic importance, margin, and revenue will also help in safeguarding the continuity of commercial relationships. The majority of companies did not heed the lessons of the natural disasters of the last decade and, as a result, suffered severe supply disruptions when the Covid-19 pandemic struck. How are companies responding to the coronavirus crisis? For more details, review our .chakra .wef-12jlgmc{-webkit-transition:all 0.15s ease-out;transition:all 0.15s ease-out;cursor:pointer;-webkit-text-decoration:none;text-decoration:none;outline:none;color:inherit;font-weight:700;}.chakra .wef-12jlgmc:hover,.chakra .wef-12jlgmc[data-hover]{-webkit-text-decoration:underline;text-decoration:underline;}.chakra .wef-12jlgmc:focus,.chakra .wef-12jlgmc[data-focus]{box-shadow:0 0 0 3px rgba(168,203,251,0.5);}privacy policy. This problem is compounded by the fragmentation in recent decades of the auto supply chain across many countries and many firms. Additionally, after-sales stock should be used as a bridge to keep production running (Exhibit 2). Nor did many sell commercial toilet paper to households. Use advanced statistical forecasting tools to generate a realistic forecast for base demand. In practice, companies were much more likely than expected to increase inventories, and much less likely either to diversify supply bases (with raw-material supply being a notable exception) or to implement nearshoring or regionalization strategies (Exhibit 1). While consumers are returning to restaurants in droves, supply chain issues in the restaurant industry continue in the wake of the Covid-19 health pandemic. For risks that could stop or significantly slow production linesor significantly increase cost of operationsbusinesses can identify alternative suppliers, where possible, in terms of qualifications outside severely affected regions. The analytical underpinnings of this risk analysis are well understood in other domains, such as the financial sectornow is the time to apply them to supply chains. The situation has been especially difficult for businesses with complex supply chains, as their production is vulnerable to disruption due to shortages of inputs from other businesses. Vulnerability must be an everyday, not a 100-year, planning event consideration. Rationing, e.g., many retailers respond to shortages by rationing certain items. Some streamlined their product offerings, reducing machine downtime and, in particular, shifting to large-roll products that could get more paper to households without costly changes to machinery. Others may slip back, reverting to old ways of working that leave them struggling to compete with their more agile competitors on cost or service, and still vulnerable to shocks and disruptions. We'll be in touch with the latest information on how President Biden and his administration are working for the American people, as well as ways you can get involved and help our country build back better. Others invested in their distribution systems, so that they could anticipate and respond more quickly to local shortages. The next step is to conduct scenario planning to project the financial and operational implications of a prolonged shutdown, assessing impact based on available capacity (including inventory already in the system). Some businesses report that they have been unable to hire quickly enough to keep pace with their rising need for workers, leading to an all-time record 8.3 million job openings in April. Overcoming barriers to multitier supplier collaboration, Visit our Manufacturing & Supply Chain page. Many companies hadnt rigorously identified and addressed hidden vulnerabilities. The Coronavirus and Its Impact on the Supply Chain. Coronavirus's impact on supply chain | McKinsey In September 2020, the World Health Organization, with the advice of the CSCS Task Force, commissioned an assessment of the Covid-19 Supply Chain System (CSCS) focused on three main areas: strategy, implementation and moving forward.