Yanking the Supply Chain

The disruptive impact of COVID-19 is everywhere apparent. But for many Canadians, the new pandemic reality only hit home the day they could no longer find toilet paper at the local grocery store. The shelves were empty, wiped clean by panicked buyers suddenly confronted by an unanticipated breakdown of the flow of goods in a supply chain. It was a watershed moment.

People who had never given a moment’s thought to the arcane realities of purchasing, operations and logistics (a.k.a. supply chain management) were suddenly asking themselves, “How do delivery systems work anyway?” and “How can something as small as a microbe upend them in one fell swoop?” It was a little bit like that line in the Joni Mitchell song – you don’t know what you’ve got ’til it’s gone. And the toilet paper was gone, making people very nervous indeed.

Manus Rungtusanatham, who joined the Schulich School of Business at York University in July 2019, had seen it before. As a Tier 1 Canada Research Chair in Supply Chain Management, he has spent much of his career investigating why supply networks break down. When they do, the physical flow of goods becomes interrupted, often resulting in shortages. The reasons why are complex, having to do with a long list of events and factors that can initiate a disruption. COVID-19 is certainly one such event. So was the 2002–2003 SARS epidemic.

“Triggers that cause a supply chain disruption can often be anticipated – transportation issues or longer-than-usual inspections at the border, for instance. The probability of such risks can be determined – but how easy or challenging that might be is another matter. The point is that businesses with effective risk management systems can often plan for them,” Rungtusanatham says. “But a virus is harder to anticipate. From this perspective, COVID-19 is a very low-probability event, but one with a big impact – even bigger than SARS. A black swan event.”

By having established processes in place, in addition to advanced planning, we might mitigate some of the damages.

Supply chains, Rungtusanatham explains, are essentially networks made up of interdependent entities. These entities, in a perfect world, are synced to move goods forward to be consumed by you and me. When one part is out of whack – a temporary closure of a manufacturing facility for health and safety reasons, say – then the entire chain may fall apart. An interruption in the flow of goods due to work stoppages or political interventions like trade embargoes can also lead to breakdowns in other networks developed to support economies and society as a whole.

After the first wave of COVID-19 hit Canada last winter, supply chain disruptions were especially acute for hospitals and health care–related service providers. Personal protective equipment in the form of surgical gloves, isolation gowns and N95 masks was in high demand and not readily available. In part, this was due to hoarding compounded by a sudden spike in demand. Supply was everywhere constrained as countries sought to stockpile, putting front-line heath-care and emergency-response workers at risk.

This very concern spurred the City of Toronto to reach out and ask for expert advice this past summer. Answering the call, Rungtusanatham, together with David A. Johnston, Centre Director for York’s new George Weston Ltd. Centre for Sustainable Supply Chains, brought together students and faculty from both the Schulich School and Ryerson University to evaluate and guide the City’s pandemic response ahead of the second wave.

Having examined supply chain risk management in the time of COVID-19, Rungtusanatham offers up some key strategies. First is that businesses – as well as governments and hospitals – need to consider how they allocate their sourcing spend.

“Instead of sourcing 100 per cent overseas – for example, from China – why not pursue dual sourcing? Perhaps 80 per cent of what is needed globally and 20 per cent locally, or somewhere nearer in distance? Though costly, this dual-sourcing strategy would pay off in times of crisis, ensuring that a business is not caught short when a supply chain disruption occurs, particularly on foreign soil.”

Another suggestion is to heighten visibility and transparency across supply chain systems to determine the origin of a supply and identify other possible sources should that original link in the chain break down, for whatever reason.

“No supply chain is foolproof,” Rungtusanatham says. “Avoid becoming complacent. It is better to think systematically on how to minimize the severity of supply chain disruptions by assuming the worst-case scenario, and then putting in place people, processes and procedures that will detect disruptions early and mobilize resources quickly to contain the fallout and damages. By averting a problem, the goods will flow. People will get their toilet paper.”  ■