Rethinking Just-in-Time Supply Chain, For The Possible Next Time

Hi, I’m Rick Barron, your host, and welcome to That’s Life, I Swear

The COVID pandemic threw Just in Time Delivery manufacturing practices out the window. Now what?

Let’s jump into this

We’re a society that can purchase anything we desire, from new high-tech cars, clothing, new high-tech gadgets, you name it. We’ve been weaned on buying 24 hours a day and having items shipped to our doorstep the next day was the norm.

Those simple days came to an end in early 2020.

Courtesy of: John Hopkins University

The Covid pandemic took our world by storm. As the pandemic accelerating rate increased the virus transmission and deaths, the global response for containment also increased. We would all learn a lesson in just-in-time economics and its impact on the Supply Chain.

When the Supply Chain is not running smooth, we learned a lesson in economics very quickly. Witnessing the disruption of our healthcare system, freedom of movement, employment, the economy, and our ability to buy goods, 

We saw lines at stores grow longer and longer by the week during the early months of 2020. People were stocking up on toilet paper, hand sanitizers, food, and household goods. The sense of nervousness intensified when hearing about shortages of ventilators, masks, and medical equipment. 

At this point, we began to feel the unraveling of the Supply Chain. 

Courtesy of: Advance First Technologies

What we didn’t know was that we as consumers, had a role in feeding the unraveling. Call it a self-inflecting wound.

I remember looking back to March of 2020, and hearing the news across the various media sites, that the government was instructing our country to self-quarantine for at least the next two weeks due to the COVID outbreak.

We as a country had no idea of what was coming. At first, working from home [for those who could] wasn’t too bad of an idea. Taking a break from not having to get up in the morning and dealing with the morning traffic, not to mention the evening traffic was pure bliss. 

We all thought a few weeks of self-quarantine wouldn’t be so hard. But unfortunately, America’s psyche thinking that this ‘will be quick and blow over in no time’ hit a stone wall. 

As time progressed, the two-week timeline stretched to a few more additional weeks, and then more. In time, the reality of what the world was about to deal with finally hit home. 

As the days and weeks moved forward, we adjusted to the new norm of being homebound, not going into the office, and converting our bedrooms, garages, and living rooms into our new office cubes. My next-door neighbor, a fourth-grade teacher, soon converted her garage into a new classroom.

Staying locked up in our homes, caused us to make changes in our lifestyle habits. One of those habits that changed was our buying online intensified. We had to have comfort, which dictated adding gym equipment like a treadmill or a stationary bike. 

But, of course, what home would be complete without a new video game console, 90” TVs in our garages, throw in a wine frig, and think you get the picture. 

During 2020 and into 2021, we continued with our online buying habits but with a panic state of mind. We sought not to be caught short with what we needed during 2020, no matter the wait times for deliveries. 

Courtesy of: New York Times

In 2021, the economy started showing life, and the beginning of a comeback, or normal as kept we kept calling it. Online shopping quickly intensified, if not more so. This is where we hit the stone wall.

Eventually, we said a final goodbye to 2020 and moved into 2021 with new hope. We saw light at the end of the tunnel with vaccines coming to start addressing COVID. We finally saw a medical solution to those of us anxious to start living again and get out of being cooked up in our homes. 

However, as we began to see relief with the COVID problem, another problem emerged. Our buying online habits over the past two years threw a monkey wrench into the supply chain.

Courtesy of: The Current

With a giant surge of purchases happening online, online and non-online companies found that factories whose production tends to be pretty predictable, found the pipeline being overwhelmed.

The ramping up to satisfy a surge of orders during 2020 and 2021, was falling short, way short.

Our supply chain was about to be tested, better yet, it would go through a Tsunami stress test the likes that it wasn’t built to handle.

When the COVID kicked in early 2020, we experience shelves going from empty, to very empty. In the blink of an eye, everything from our favorite cereal, toilet paper [essential item indeed], to online sites started showing ‘out of stock’ signs. 

Courtesy of: CNET

How did we get here?

To begin this story, we need to go back to the early stages of the pandemic. 

Factories worldwide started feeling the wave of the lockdown throughout 2020 and into 2021. They had to cope with workers getting sick or quitting thus cutting back on production. What began as a trickle in the labor force soon spun into a new catchphrase for 2021, the great resignation. 

According to the U.S. Bureau of Labor Statistics, we witnessed over 4 million Americans around July of 2021 quitting their jobs. Many workers, mainly older, who did not want to jeopardize putting themselves at risk, fearful of catching the COVID virus, leaped to retire several years early. In addition, families were impacted by losing a workforce in the child care industry, thus being forced to stay home with their children now more than ever.

With all of this happening, the dominos started to fall. 

Seeing the demand for shipping goods worldwide going from a waterfall to a trickle led to factories having no choice but to reduce work schedules.

There was another contribution to the supply chain breakdown. Today, factories have a large web of components required to build their products. Anything from housing construction, flat-panel TVs, refrigerators, mobile phones, computers, all things high tech. 

What does that mean? Computer chips. We saw a significant impact with the broken supply chain in the car industry. The auto industry has long operated on a just-in-time method of manufacturing as other companies worldwide did.

The pandemic was causing economies to go upside down, with factories and shipping companies dealing with the wide gap in producing goods and getting them to their destinations. 

Buyers dealt with delays for cars, office fans, computers, TV’s, you name it, all of which were impacted due to the shortage of computer chips and other materials. The irony in all this is that our economy was beginning to come back. So instead of running full steam, we were running with crutches due to a collapse with the supply chain. 

The car industry really took it on the chin with the breakage of the supply chain. Today, cars are moving computer machines. They do everything short of washing and waxing themselves. Various computer components for vehicles come not from one country but multiple countries. 

Taiwan, South Korea computers assembled in China may require a chip made in the USA or Malaysia. A flat-panel display from South Korea, and dozens of other electronics drawn from around the world, require specialized chemicals from different parts of China or Europe. Our reliance on a few key areas in our world to keep our factories humming, is a problem in and of itself.

If matters were not already bad enough, we found ourselves dealing with worldwide traffic jams with shipping containers. Due to early on spikes in consumer spending online and overwhelming the pipelines, shortages online, lack of truck drivers and port workers, our major ports became parking lots the likes we could never have imagined. 

Courtesy of: CNN

With all of the pandemic restrictions forced upon us as a society, we faced the limitation of dockworkers and truck drivers. Do the math. Every container that cannot be unloaded in one place is a container that cannot be loaded somewhere else. 

We were getting a hard lesson in economics.  Any hiccup in the supply chain equates to delays and extra costs for everyone. COVID only exacerbated the just-in-time journey and turned it upside down. 

It was the perfect economic Sunami. With more people now working from home due to mandates and shut-downs, moving them to buy even more online-only led to clogging the shipping and transporting systems worldwide. Add to those people quitting their jobs in mass, causing shortages in crucial areas such as shipping, transporting, and manufacturing.

So, here’s the million-dollar question. When will the shortages end? 

Your guess is as good as mine. Consensus amongst the economic gurus is that perhaps by the Summer of 2022, even as late as early 2023, and maybe longer should we encounter another COVID swing or who knows what.

So, what lessons can we learn from here? What's the takeaway from this story I just walked you through?

Eventually, the world will begin to come back to ‘normal.’ When we get there, and we will, collectively we need to look back at what we went through dealing with a broken supply chain.

Another pandemic can, and most likely, will occur again someday. Suffice it to say, other factors could throw our supply chain into a spin, not just a pandemic. That said, we need to deal with reality, learn what happened with our supply chain, and prepare better next time, particularly in a digital world. 

As a result of the supply chain going through the numerous ups and downs, we saw how the supply crunch drove up prices. The pandemic was terrible enough but throw inflation into the mix and the situation became unbearable. 

Companies have an opportunity to begin figuring out solutions, given the vulnerabilities that the recent supply chain crisis has exposed. There are many, including how to deal with cargo ship gridlocks at the world’s busiest ports.  

A few ideas to consider:

1.     Multi-Sourcing: Approximately 31% of companies have developed alternate sources of even more supply for 70% or more of their tier 1 suppliers, according to data from APQC [American Productivity & Quality Center]
 

2.     Diversify: China has slowly become the "world's factory" The outbreak of the coronavirus had massive implications for global supply chains. Approximately 200 of the Fortune 500 firms have a presence in Wuhan—the location of the initial outbreak. But, again, COVID has made it clear not to put all your eggs in one basket. 
 

3.     Technology: Without people's labor there is no movement. COVID, forced companies to lay people off to cut costs, some people lost work because of government lockdowns, quarantine or health risks. 

As companies recover and rebuild from the impact of the pandemic, companies need to look into new technology, such as investing in technology to help with supply chain optimization/visualization applications.
 

4.     Made in USA: We need to look at re-inventing our thinking of manufacturing outside our country, and built facilities within that would be of strategic concern for the United States. Case in point, semiconductors. 

I hope the leaders in economics and world leaders work together in taking this past nightmare as a lesson to build a new plan that will hopefully lessen the blow the next time. 

Well, there you go. That’s life, I swear.

For further information regarding the material covered in this episode, I invite you to visit my website that you can find on either Apple Podcasts or Google Podcasts, for show notes calling out key pieces of content mentioned, and the episode transcript.

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