The coronavirus pandemic snarled the world’s sprawling supply chains for months, shutting factories, disrupting shipping and making it difficult for companies to get products from factories to consumers. Now, many companies are considering changing the model to avoid future product shortages and transportation delays, even if it might increase costs. Some are looking at moving production closer to home. Others are considering spreading small factories around the world instead of putting all their manufacturing in one place. There is little evidence of a big shift so far, given the costs and the uncertainty. But surveys and interviews with corporate executives show some have started to make changes and many are seriously considering them, though consultants say the moves could take several years to roll out.
Three Scenarios to Guide Your Global Supply Chain Recovery (SMR)
Even as the business climate remains deeply unpredictable, supply chain leaders should act now to plot their comebacks. These are five steps that supply chain executives should take to develop an effective recovery plan for their business:
Step 1: Identify suppliers in affected regions and estimate TTR by scenario.
Step 2: For each scenario, estimate demand and assess which products and assembly facilities will be affected by these suppliers and for how long.
Step 3: Use the insight from the previous step to determine when and for how long you should shut down, or significantly reduce, manufacturing activities.
Step 4: Determine how to ramp up capacity by focusing on sales and operational planning. Allocate the available capacity and inventory only to products that allow you to achieve your specific objectives during the recovery period.
Step 5: Book logistics capacity as soon as possible.
The Strategic National Stockpile doesn’t have enough supplies to meet the federal government’s own targets. But in the long run, health officials don’t want to make it bigger. The future of the stockpile is about having better visibility into the supply chain to know what’s out there and what is available, and how do we respond in a way that is timely and effective. Entering into contracts with key distributors that it would pay to share information on their supply chain, manage some of the national stockpile’s supplies, and agree to assist in future emergencies.
The development of Valor Glass began in 2011, when Corning’s researchers were working to reinvent medical vials, which had not changed substantially for a century. Using platinum-lined ceramic crucibles, heated to more than a thousand degrees, they spent hundreds of hours combining silica with new ingredients. They found that, by adding alumina and removing boron, they could make the glass far more resistant to degradation, and therefore less likely to leach contaminants into the contents. Other innovations came later, and the vials went on the market in 2017. This June, the federal government granted Corning more than two hundred million dollars to produce them for COVID vaccines.
A key ingredient in what could be the first U.S.-approved Covid-19 vaccine comes from a family-owned company with 90 employees in the Austrian countryside, underscoring the fragility of the potential treatment’s supply chain.
Renewable energy developers have struggled to finish projects as the pandemic disrupts construction and global supply chains. EDF Renewables executives were hopeful they would finish installing 99 wind turbines in southern Nebraska before a year-end deadline but pandemic related setbacks have hampered EDF’s efforts to finish the $374 million project by the end of the year.
Seven reasons the coronavirus has hobbled the supply chain for a pantry staple:
1) Sweet Corn Supplies Are Finite – corn for canning makes up the smallest portion of U.S. crop.
2) Land Is Limited – a relatively small number of farmers specialize in growing sweet corn.
3) Corn Is Only Harvested Once a Year – fresh corn is canned right after the harvest in late summer, and that yield is the entire supply for the year.
4) There Aren’t Enough Trucks – Trucking companies shrank their fleets last year to improve profitability.
5) Truckers Are Rejecting Contracts – The decrease in trucking capacity drove up prices, prompting some transportation companies to reject existing contracts in favor of last-minute orders at higher prices.
6) Corn Is Irreplaceable – there is no substitute
7) Hoard Mentality – hoarding has created shortages
Japan is attempting a delicate balancing act as the pandemic has underlined the risks of the world’s economic reliance on Beijing. Despite growing concerns about doing business in China, the economic incentives to stay remain too great.
The race to distribute Covid-19 vaccines to hundreds of millions of Americans could come down to one question: Do we have enough freezers? Some of the shots now in late stages of testing must be stored at temperatures potentially as cold as minus 80 degrees Celsius, or minus 112 Fahrenheit, similar to conditions for transporting ice cream and steaks to supermarkets and eventually to people’s doorsteps.
Hospitals, pharmacies and physicians’ offices are expected to be vaccination sites, but they have few such specialized freezers. That is prompting a mad dash by logistics, public-health and drug-industry officials to cobble together a cold-storage supply chain that can deliver vaccines around the country without letting them become warm and ineffective.
Blame lean manufacturing. A decadeslong effort to eke out more profit by keeping inventory low left many manufacturers unprepared when Covid-19 struck. And production is unlikely to ramp up significantly any time soon.
At the beginning of the pandemic, it was nearly impossible to find toilet paper, cleaning supplies or canned soup. Five months later, supplies of those goods are recovering, according to data from market-research firm IRI. But shelves remain generally emptier than they were before the pandemic, and it could get worse before it gets better.
A new report on factories in Malaysia that create products for Brooks Brothers, Levi’s, LL Bean and others examines the high prices workers pay for their jobs.
Finding a vaccine that works effectively and ensuring that the vaccine is mass distributed are two different challenges. Rapid manufacturing and distribution of a COVID-19 vaccine will rank as one of the most challenging government initiatives ever undertaken. Lives—and a normal way of life—are at stake. But with aggressive planning, management, and funding, a strong and competent federal government has an opportunity to prove that it can be an extraordinary force for good in people’s lives.
Making a vaccine quickly is hard enough but distributing one worldwide offers a host of other variables, and conflicting forces may work against the effort: The infrastructure powering the global economy is scaling down for a protracted downturn just as pharmaceutical companies need to scale up for the biggest and most consequential product launch in modern history.
Japan is paying 87 companies to shift production back home or into Southeast Asia after the coronavirus pandemic disrupted supply chains and exposed an overreliance on Chinese manufacturing. While China’s economy is already recovering from the coronavirus shock, the pandemic threatens to dent its reputation as the “factory of the world” — at least in some industries.
It’s a moment of reckoning for global supply chains. But that doesn’t mean companies are flocking back to the United States.
There are good reasons for some companies to move out of China. Wages are rising, whittling away at one incentive to manufacture there. And deep fissures between the United States and China have opened in areas like security and technology, which could lead to more aggressive action by either side, regardless of who wins the presidential election in November. Still, more companies leaving China does not necessarily represent a win for American workers. Like La-Z-Boy, many companies that are moving some facilities out of China are relocating to countries where wages are even lower. While U.S. trade with China fell sharply last year, imports from Vietnam, Taiwan and Mexico swelled. For many companies, making their supply chains more resilient has actually meant spreading out production around the world, not concentrating it in the United States. Purveyors of consumer products, fast food and automobiles continue to expand in China, which is home to a rapidly growing consumer market and the world’s greatest concentration of factories. Some firms have struggled to find factory space or skilled workers outside of China.
David Simchi-Levi discusses some of the environmental, research, and packaging concerns in supplying populations with a COVID-19 vaccine.