Mark Baxa is president and CEO of the Council of Supply Chain Management Professionals (CSCMP). Ahead of CSCMP’s annual Edge conference in October, I spoke to him about supply chain lessons from the pandemic. The interview has been edited and condensed.
MICHAEL LEV: Let’s talk about the before and after of the supply chain crisis. How did the pandemic change the industry?
MARK BAXA: Prior to COVID, we were at a level of performance where many companies were talking about zero inventory, just-in-time inventory. Optimization was king. We were really fine-tuned, and there was a reason for that. The first play was to be the most expedient and efficient delivery system to the market. It was a competitive advantage.
The second was the cost advantage. Total cost was a big deal for many companies. Inside of that were trusted partner relationships leaders could rely on. In other words, everything was working for the most part as it should: optimization, new practices, new ways to take costs out, enhanced speed to market, and reduced working capital in the supply chain. You did that by lowering inventories through supplier networks and creative designs and digital technologies to create visibility so you can create to order or make to order. All of that was in vogue. And then COVID hit, and it was all blown apart.
ML: In pursuing cost and efficiency, did global supply chains become too fragile?
MB: A lot of articles were out there about how the supply chain was fragile and COVID exposed all this stuff. No, the supply chain wasn’t fragile. It was fine-tuned. There’s a limit to how much money will be invested to build a product, right? You don’t spend any more than you have to. And you trust the demand cycle, the predictive aspects of demand, although it’s never 100%. So, you didn’t over-supply. We didn’t pre-stock with the hope of selling. Retailers had their demand forecast and manufacturers had their own. In the middle you hoped you met.
When COVID hit, all the trusted supplier relationships were blown apart. Humans were now working from home. We had to reset labor expectations for those that had to show up on the job. We had to reset how we were going to protect those folks while they were on the job from the spread of COVID. The outcome of all of this is deep intrinsic learning about how risks in the supply chain became so apparent and should have perhaps been known ahead of time.
The fragility of the supply chain, if you will, or the taking apart of the fine-tuned supply chain — at the epicenter of that were risks throughout the tiered levels of the supply chain.
ML: What’s an example of a lesson learned?
MB: We have to think differently about what risk means. Supply chain leaders are now challenged with keeping good talent who have the aptitude to learn but also understand suppliers and what their risks are in a way that demands transparency.
Let’s take Wuhan — not about where the disease likely came from but Wuhan as an epicenter of manufacturing for the automobile industry, with all the parts that came through there. We have multi-service providers. The diversification for the automobile industry was, “I need this specific part, I’m not gonna buy from one source. I’m gonna buy from three.” Well, they buy through multi-service providers that source the stuff. What they didn’t realize in many cases — and the same example holds through the supply chain of any other industry — is all three of those distributors were sourcing the same widget from the same manufacturing plant in Wuhan. When that plant closed, nobody had parts. There was no diversification. Yet we didn’t understand the risk of that single manufacturer. It’s the same thing with semiconductors today. In excess of 80% of the world’s semiconductors are finished in the factory in Taiwan. Well, what kind of risks does that present?
ML: Tell me about the Edge conference.
MB: It’s part of what I call a learning thoroughfare. It is a major stop off point in any supply chain professional’s journey of continuous learning — continuing to develop as an individual but also for the benefit of the business. This year’s Edge conference features four days of very rich content across a wide range of supply chain topics such as leadership, procurement, and sourcing; critical thinking around planning, inventory, manufacturing, and logistics, distribution, and customer service; and the geopolitical aspects of everything we are facing, and then overlaid with a heavy dose of technology. We’ll have upwards of about 3,000 people from about 40 countries.
Coming soon: More from my conversation with Mark Baxa.
Read the complete Issue 41 of ChainMail here.
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