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What supply chain players are learning from the pandemic

By Karen Haywood Queen Contributing Editor, SME Media

To listen to this interview, go to https://www.sme.org/smemedia/podcasts/2020/what-supply-chain-players-are-learning-from-the-pandemic/

Passport to Innovation: A conversation with Contributing Editor Karen Haywood Queen

SRIDHAR-TAYUR-HighRes 768x432.jpg
Sridhar Tayur
University Professor of Operations Management and Ford Distinguished Research Chair
Tepper School of Business, Carnegie Mellon University

Prof. Tayur, so far, where globally and in particular regions of the U.S. are disruptions to manufacturing supply chains being felt the most?

In the U.S., we are not seeing any specific localized disruption yet, although I’m watching New Jersey where it could be on the cusp. There are a lot of manufacturing facilities there in pharmaceuticals and chemicals, and therefore that’s an area I think we should be paying attention to. Globally, of course we are seeing Italy shut down. China was shut down, and it appears to be recovering now, but again I think it is too early to say if the epidemic has passed even in China.

What is the role of additive manufacturing?

This is an added mechanism to be able to produce a variety of items. The downside is, this is not mass production and therefore the production rates are going to be much slower. 3D printers and this kind of additive capability are spread out across the country, so there is a natural geographic dispersion in supply rather than being constrained to get a small number of supply points or sources. The downside, of course, is the quantities are not as much as you can produce in large factories.

The tension between labor and capital has always been a focal point of the manufacturing sector. How will the coronavirus pandemic change that?

The good news is that since the beginning of the 21st century, the relationship between labor and capital, between automation and robotics has actually changed importantly from the traditional narrative of the 20th or the 19th century.

How? Right now, when people build robots, they build them to enhance humans, not just to replace them. So this is called autonomation, and these kinds of robots are called collaborative robots, or cobots.

So, what is happening today is that if you add labor, you’re actually enhancing the ability of the labor to be very effective. So I think the good news here is, because we have labor and automation working together, not actually a substitute but a complement, you will be able to respond very effectively.

Does the pandemic provide an opportunity for manufacturers to develop new capabilities?

Yes. The business of collaborative robotics is not yet fully widespread. I think many folks still have the 19th century and the 20th century view that somehow we are trying to replace labor with automation. But this has accelerated collaborative features, and therefore we are able to put man and machine together, or women and machine together, and move away from the traditional narrative of substitution and work in a new narrative of collaboration and enhancement.

How should manufacturers better deal with crisis moments like this, which could happen at increasing frequency?

Most of us run supply chains with inventories, and we have safety stocks and cycle stocks  and we optimize our working capital for normal day-to-day work. So we are used to having some amount of uncertainty, we are used to keeping some amount of safety stock. Now I believe it is becoming even more important.

Obviously, chemical companies and pharma companies have been doing it to avoid being stuck in catastrophic events with strategic stocks. So more companies outside of these traditional industries of chemical and pharma might start looking at how to manage inventories in times of catastrophe. Most people will look at strategic stocks more carefully. It’s not enough to plan for them. You should also make sure they are replenished when used.  

For example, in the 2009 situation—the H1N1 flu pandemic—where 100 million masks were used from the national strategic stock here in the U.S., it is really baffling to me really why it was never replenished by the Obama administration for seven years, and then by the Trump administration for the last three years. We simply should not be in this situation.

What, if any, steps should have been taken, and by whom, as soon as the crisis became apparent in China?

I don’t want to be a ‘Monday morning quarterback.’ It is difficult to say when data was coming from China. It was spotty, and data from China is generally viewed with low trust and suspicion. So, I think one should make sure that the people were looking at the clean data and trustworthy data. But it’s easy in hindsight to say, ‘Look, there were enough warnings. You should have started production and replenishment of the key PPE (personal protective equipment) and ventilators and such, and you should have started the clamp down and social distancing sooner.’ Looking at things now, I can also say that. But at that time, it wasn’t clear. And when the causes are not known, there is always the fear of overreaction. Even now, for example, there is a mixed message coming from the (Trump) administration. Is the cure worse than the disease, right? These are very difficult choices to make, and at this moment we are where we are.

Did any particular manufacturers or manufacturing sectors make the right moves early on?

I’m not sure. I know a lot of these companies and several industries: I was the founder of the enterprise inventory optimization software firm SmartOps, and hundreds of global supply chains run off this software. It could be the case that some of them were simply better prepared to shift production in terms of what to make versus what they were making.

You’ve seen in the news that Unilever stepped up the production of sanitizers, the handwashing liquid. Medtronic is obviously shifting production. Estée Lauder and Diageo are going from perfume and alcohol into hand sanitizers. I think many others are stepping up. I’m not sure if they were early, or because that was not public, it could be the case that they were prepared and we just don’t know.

After we get through this pandemic, what should manufacturers consider doing to be prepared for the next hugely disruptive event?

In addition to strategic inventory, manufacturers can invest in flexibility more strategically. Many companies have known the value of flexibility, in terms of volume as well as changing the product mix. But I think they’ll look at this even more critically and say, ‘We will always look at flexibility from a normal up-and-down operation. What will flexibility look like in the case of catastrophe?’ I also think they will have protocols and process in place. Supply chain and operations management is driven by many processes. We have a lot of processes for day-to-day operations. We know how to do production planning. We know how to do forecasting, order fulfillment. I think similar protocols and processes will be created and people will practice for catastrophic events so that they don’t have to react in an ad-hoc manner. Financial companies have processes in place after 9/11 for data storage and redundancies, for example.

So you see manufacturers doing dry runs for events like this more than they have in the past?

I would think so. If you look at safety measures, you’ll see them in chemical companies, and some of them may even be required by law. I believe more and more industries and companies would like to have that so that the first time you’re hearing a fire alarm go off does not mean there’s a real fire, right?

We try out our fire alarms when there is no fire, because we want to make sure things are working when the actual fire comes.

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