Pandemic paves way for supply chain reform

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COVID-19 has ravaged the globe with unprecedented challenges most have not experienced in their lifetimes. The U.S. economy is no exception, but Nick Little presents a solution not only to strengthen carrier, shipper and investor relationships, but also pave the way for positive culture change within American supply chains. 

In his March 3 article for Railway Age magazine, the Michigan State University director for railway education explores impacts the pandemic could make on international and domestic markets. Possibilities range from the economy recovering from setbacks within the first quarter to a worst-case scenario of low consumer confidence and limited flights continuing into the fourth quarter. 

“As the days pass, the former seems less likely,” Little said March 10. “I don’t think anyone knows just how much of a hold this could get.” 

Dire circumstances indicating potential global slowdown could include workers’  restrictions and quarantine slowing production. Once supply chain movement resumes, backlogs and long lead times could prevent each stage from recovering quickly. 

The nation’s ports already display congestion, as empty containers sit idle from canceled shipments. Railroads will be prompted to shift human resources and power to address backlogs, and ships will anchor where capacity is available. Agility and flexibility will be key in all stages of the intermodal shipment process to achieve good traffic flow. 

Little acknowledged while the United States’ most significant trading partner is China, disruptions with Canada and Mexico traffic, or domestic markets such as Chicago, could create more serious setbacks.

“The latter scenario is further back in the supply chain; for example, it could stop vehicle production in North America,” he said. “It depends on the supply chain you’re looking at. Some situations could be worse for some than they are for others.”

Regardless of how differently each industry experiences COVID-19, Little asserts one strategy applicable to any market. He urges representatives from each stage of the supply chain to form task forces through which communication can flow easily and frequently, nurturing healthy relationships among each component solid enough to withstand economic headwinds. He details this need for end-to-end supply chain visibility in his Rail Optimization White Paper published through the university as part of a series exploring the industry’s future. 

“Supply chains are like peeling an onion,” he said, explaining that the many layers of relationships and reliance comprise the whole, each one affecting the others. 

Tapping into his extensive railroad management background and industry research, Little concludes railroads don’t typically consider themselves part of the supply chain. He said this mindset must shift if they wish to overcome disruptions successfully.  His white paper describes the current situation as a dysfunctional alignment among carriers and unsuitable for the 21st century. View Rail white paper.

Supply chains can achieve change through appointing personnel for each component of a given product — including truck drivers, manufacturers, railroaders and port employees — to frequently connect virtually. The meetings can offer everyone a better understanding of the challenges each stage faces, as well a discussion about possible solutions to those setbacks. 

“Where the supplies come from and the requirements for getting products to customers should be an ongoing discussion,” Little said. “Parts of the supply chains are conversing about this already, but it is not being done well or involving every stage.”

Little expressed concern for the traditional method of addressing crises, which typically occurs only when a clear problem arises and depends on the suppliers to do whatever they can to provide a solution. Alternatively, he proposes supply chains remain proactive and hypothesize the best and worst-case scenarios, as well as everything in between, and develop action plans for each. Such communication and organization ensures crises do not hit unorganized and underprepared industries. 

“Open, honest communication must happen,” he said. “You can’t resolve long-term effects with plans that satisfy the short term.”

Although the COVID-19 pandemic has advanced too far for such action to be considered proactive, Little noted how forming these teams now to address issues is much better than no response at all. Furthermore, he hopes supply chains embrace the pandemic’s impacts as a wakeup call triggering a much-needed philosophy shift.

“Ultimately, it’s about positive culture change,” the business expert said. “If people start the conversation and realize what’s in it for them, it could make a huge impact and transform their process.” 

Little advises transloaders and other groups  to form three-person groups immediately to meet daily and schedule conference calls with other supply chain component representatives. Everyone should strive for the most consistent flow of production possible, as well as forecast the variables they may encounter and share response plans with the entire chain. 

A recent article from the Association for Supply Chain Management (ASCM) echoed a few of Little’s philosophies regarding propelling supply chains through the present health crisis. Risk management experts advised identifying key suppliers in affected areas and securing alternative sources if necessary, solidifying plans for the inevitable rebound and maintaining focus on a certain recovery. 

Anyone interested about learning more or needing direction and resources can reach Little through the Eli Broad College of Business. He also noted his colleagues have prepared various seminars scheduled for this fall. See the college’s railway education website for details.

“It’s a shame that it takes COVID-19 to raise widespread awareness about this topic; but if it ignites lasting change, I will be encouraged,” he said.