If you have visited Home Depot or any other stores recently, you will find that many popular products, such as large household appliances, are all sold out as of couple of months ago and new inventory may take over one and a half months to arrive. What is going on?
This is a good opportunity to study and evaluate supply chain operations of many products during this pandemic. From a store or retail outlet perspective, the first phase was the consumer panic in both March and April 2020, when COVID-19 entered into the US. Store sales plummeted as consumer spending hit an all-time low due to the lockdown. Store sales later surged in May and June as people were in the midst of working on numerous projects from their homes. By July, stores had very low inventories. By August, the most popular products were all sold out due to inefficient restocking processes. The depletion of the supply chain was because of the very limited capacity from mostly local suppliers with different kinds of restrictions such as delivery, warehouse, production, etc., to meet COVID-19 requirements.
What we have seen this year demonstrates the essence of a full supply chain performance from materials, sub-assemblies, product manufacturing, shipping, warehousing, and delivery.
JUST-IN-TIME (JIT) MODEL CHALLENGE
Most business use the JIT model — the most vulnerable to any supply chain interruptions. With the COVID-19 pandemic, almost every tier of the supply chain is suffering some kind of interruption. Depending on the actual supply chain design and supply chain quality, some products’ supply chain have been totally shattered in this environment; others have been unscathed. A few well-planned, high-quality supply chains have taken advantage of this opportunity and quadrupled their sales.
RISK MANAGEMENT: PLANNING FOR LOW INVENTORY
At the very beginning of the Pandemic, most businesses adapted the low inventory strategy to minimize the risk of impact of COVID-19. This has led to decreased inventory on every tier of the supply chain. When demand surges, the restart of the supply chain requires ramping up of all tiers. Compounded with interruptions, the re-establishment of inventories could be on a prolonged timeline.
LOW CAPACITY RESTRICTIONS
Depending on the physical deployment of a supply chain around the world, the sections of supply chains that went through regions with the most COVID-19 impacts will suffer major labor shortage, and low productivity. These parts of the supply chain will form bottle necks and restrict throughput.
SUPPLY CHAIN RESPONSE SPEED
With a resurgence in consumer purchasing, it is now a race to restart supply chains. Naturally, the fastest supply chains are those that have had the least impact from COVID-19. Or, the supply chains who have back-ups that can be used to alleviate the previously mentioned bottle necks. A crisis is a true test of supply chain resilience.
THE WEAKEST LINK OF THE SUPPLY CHAIN
The strength of a supply chain is characterized by its weakest link. Every product has a supply chain composed of materials, secondary processes, manufacturing, assembly, logistics, warehousing, and delivery. Repairing the broken link in a supply chain can be very difficult during a crisis. But partnering with resourceful service providers makes it tremendously easier.
RECOVERING FROM SHORTAGE OF SUPPLY
If you have a supply chain that can meet the surge of demand, congratulations! You have a solid risk management performance that has proven well in this crisis. Most likely, you have positioned yourself ahead of your competition.
For those with bottle necks or nothing to sell, it is time to revisit your supply chain design and get the best professionals to help and create new solutions. There are still opportunities to recover as fast as possible.