Enterprises are planning to rebuild their supply chains in the wake of the pandemic of 2020.
Well, no, not really.
Many enterprises are planning to resume production and boost inventories in the aftermath of the COVID19 pandemic.1 Some firms will narrow their product lines to those that are in high demand (e.g. toilet paper). Others will stock up on raw materials and seek vendors that are nearer to their production sites as alternatives to risky international sources.
Not many firms, however, plan to build or rebuild supply chains. I don’t blame them.
Building a supply chain is not an attractive option, at least at first glance. Most enterprises work within existing supply chains and would not outright see a good reason to build one that overlaps with other organisations.
Enterprises would likely focus internally in their own operations if there’s any supply chain building that needs to be done. And even then, enterprise executives would hesitate to do any major change if they perceive it would entail too much work and cost that wouldn’t reap much beneficial return.
Some companies in the past did try to rebuild their supply chains. They called it “re-engineering” and it was popular in the 1990’s. The idea was to redesign business operations from scratch and then apply sweeping changes to existing operations.
It didn’t last long.2 Many companies ended up downsizing instead of changing. A lot of people lost their jobs and companies didn’t realize much of any reward. Re-engineering quickly lost its luster as fast as it was introduced.
Some consultants, academics, and information technology (IT) vendors still push for re-engineering though they avoid the term. Some pitch IT platforms such as Enterprise Resource Planning (ERP) to drive operations improvements.3 Alas, ERP and other similar platforms have not been as successful as hoped. Many projects have fallen to the wayside.
Many enterprises took to managing supply chains than into re-engineering them. They sought talented people who’d know how to regulate inventories, negotiate with vendors, process orders, and make sure operations would comply with the latest environmental sustainability rules and occupational safety & health guidelines. Executives also placed hopes that supply chain managers can lead in implementing new technologies such as artificial intelligence. Supply chain management had become the norm. Re-engineering was forgotten.
Then the pandemic came.
Enterprise executives know that supply chains need to change in the aftermath of COVID19. And it isn’t just because of COVID19. Before that, it was the tariff war between the United States and China that turned global trade upside down, not to mention similar disputes such as the British exit (Brexit) from the European Union. There were also the supply and price fluctuations in commodities from metals, rare earths, to crude oil. There were also the natural disasters. There were also the cyber-security data breaches. And there were also the numerous upstart entrepreneurs who were introducing technologies such as drones, ride-sharing, video-streaming, and ecommerce mobile apps that threatened traditional businesses.
Enterprises had to accept: supply chains, especially the global ones, were vulnerable. They don’t work well in a disruptive environment. The pandemic proved it. All one had to see were the idle factories, closed warehouses, shut stores, and empty shelves. The present supply chain set-up no longer applies.
Building supply chains isn’t really that hard and expensive. Sure, it requires investment but just like supply chain management, the key is talent. One just has to employ the right people with the right talent. The good news is that the talent is there in front of us, ready to work and available. They are the industrial engineers; they have the tools and the skills and whom I’d rather call supply chain engineers.
It’s not management but engineering that would drive the building of supply chains. Engineers build things. That’s their role. Managers don’t do building; that’s not their role.
The process of building supply chains is not too far off from constructing a factory or warehouse. One has to have a plan, a timeline, and a full list of resources and costs. And one has to have a engineer with the expertise and leadership to design and oversee.
The difference lies in the nature and scope. Whereas a facility such as an office and warehouse lies within the bounds of an enterprise, a supply chain encompasses the stream of products and services that crosses organisations and borders.
A supply chain is like a river. Build a dam and that’s a facility at a point in the river, with the purpose of harnessing the river’s water. Building the supply chain involves setting up systems and facilities along the river to ensure the continuous and sustainable flow of water from start to finish.
The supply chain engineer works not only with stakeholders within the enterprise but with stakeholders from other enterprises, such as but not limited to vendors and customers. The engineer identifies and designs what needs to be built along the supply chain river.
Most of what would be built first would likely be the networks and systems that link along the supply chain stream*. The engineer would seek the optimal design that would synchronise and sustain flow that would uphold competitive standards of reliability, quality, and versatility.
The 2020 pandemic is the latest in the series of 21st century disruptions to supply chains. It was the worst and it won’t be the last. Enterprises who realize that their supply chains are vulnerable and need to be built with engineering talent would be on the right track to reviving their competitive edge.
*Note: I wrote a similar blog in LinkedIn in July 2019 in which I stressed structures in supply chain building.