COVID-19 Pandemic Effects on Supply Chain

On October 6, 2020, the LMU Center for International Business Education hosted a special webinar by internationally renowned and award-winning scholar, Tobias Schoenherr, Ph.D., Hoagland-Metzler Professor of Purchasing and Supply Management at Michigan State University. The webinar was titled, “The Impact of the Covid-19 Pandemic on Global Supply Chain Management: Current Status and Future Prospects.” In his lecture, Schoenherr focused on the pandemic’s impact on supply, diversification and economic stability.

Many consumers became shockingly aware of the importance of the supply chain and its connection to their daily lives with the onset of the COVID-19 pandemic. The availability of a variety of products were often scarce in the early weeks of the pandemic; store shelves were emptied of food, cleaning products and everyday needs as consumers stocked up on goods in the midst of shut downs. However, while some products remain difficult to find, most consumers are now able to find products such as pantry staples and toilet paper that had previously been in short supply. In this webinar, Schoenherr offered an important perspective from academia and business on global supply chain management during the Covid-19 crisis and why it is an important topic as we move forward in the pandemic.

Schoenherr explained there were so many empty shelves in the beginning of the pandemic because companies had not focused on risk management and risk mitigation. He said, “Companies cannot be blamed because the last 10 to 15 years have been very stable and predictable environments. They simply took advantage of a very stable business environment.” Schoenherr noted that there had been two significant disasters and tragedies in recent history like the earthquake and tsunami in Japan, Hurricanes Rita and Katrina, and other natural catastrophes that caused significant disruption to the supply chain. However, he said, “Most of these incidents were isolated, very specific and easily overcome.”

According to Schoenherr, this stable business environment together with the short-term focus on being cost effective and efficient caused many companies to be caught off guard. He said, “There has been a push towards lean environments with close to zero inventory which was directly felt in the supermarket.” Schoenherr added, “If you want to invest in risk mitigation and risk management, it costs money. So, companies were not prepared for what was happening.”

Some of the push towards lean environments was driven by consumers. Schoenherr explained that companies have been led to be very responsive to consumers and have limited products on the supply chain because consumer tastes change so dramatically.

Companies are now asking how they can diversify in terms of production, process or products so that they are not too dependent on any one customer. As a short-term response, a lot of companies shifted to alternate sources and increasing inventory. “Again, issues that companies neglected prior to the crisis,” said Schoenherr, were “holding inventory, dual sourcing or triple sourcing.”

Schoenherr suggested that strategies for moving forward should include greater focus on supplier relationship management (SRM), broadening our understanding of risk and creating a risk management culture; as well as reconsidering the focus on outsourcing and offshoring, right-shoring and geographical diversification. Speaking to SRM, Schoenherr indicated, “relationships matter.” He suggested that companies look for long-term help from their suppliers, mutual assistance strategies and becoming “customer of choice” among other factors. In conclusion, Schoenherr said, “In times of crisis, system choke points are revealed, serving as reminders for the importance of certain topics such as supply chain management, SRM and risk management. Crises like these should direct our efforts to focus on what is truly important.”

Reflecting on the webinar, Yongsun Paik, Ph.D., director for the LMU Center for International Business Education and LMU Center for Asian Business said, “I cannot agree more that it is absolutely critical for companies to develop a trustful symbiotic relationship with suppliers to effectively meet similar challenges in the future.”

View webinar here.