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COVID-19

Companies scramble to protect their supply chains

Sabri Ben-Achour May 29, 2020
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Workers produce N95 face masks at a Honeywell factory in Phoenix. Personal protective gear is part of a solid supply chain. Brendan Smialowski/AFP via Getty Images
COVID-19

Companies scramble to protect their supply chains

Sabri Ben-Achour May 29, 2020
Heard on:
Workers produce N95 face masks at a Honeywell factory in Phoenix. Personal protective gear is part of a solid supply chain. Brendan Smialowski/AFP via Getty Images
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Ford, we learned last week, is paying some of its suppliers early to keep them alive through the pandemic. The idea is to reopen and have all the parts you need still there. 

A lot of companies are thinking about this — not just how they can stay alive, but how and whether all the suppliers and links in their chain can too, and how they can protect those supply chains. 

At the beginning of the pandemic, some companies started hoarding electrical equipment the same way they were stocking up on toilet paper. Luke Durcan handles North America strategy for Schneider Electric, which makes all kinds of electrical equipment.

“People were panic buying,” Durcan said. “People were stocking up on electrical infrastructure.”

That’s a problem for a business because it sends a shock wave through the supply chain — you have to ramp up, and so do your suppliers.

“If a supplier says, yeah, yeah, yeah, we can take your order, knowing full well they can’t fulfill it, you’re done,” Durcan said.

You might think that in 2020, a business would know if its suppliers’ suppliers were running low, or its customers’ customers were clamoring for more, but a lot of businesses don’t know that.

“The COVID-19 pandemic really exposed a lot of the vulnerabilities that we have in our global supply chains,” said Katy George, a senior partner at McKinsey. “Think about how Amazon has created this very simple way for us to track our orders. That’s a simple kind of tracking mechanism that actually many companies don’t have around their own sources of supply.”

Some companies now want to set up digital systems to see what’s happening in their supply chains. Everything from actual scanners along the way to just sharing data between businesses — something they weren’t willing to do often until now. Schneider Electric, though, has been doing it for years.

“So we can look at supplier A and say, oh, OK, these guys are at 80% capacity right now, so they’re gonna max out. So we should maybe think about placing an order with them, or we should switch to supplier B,” Durcan said.

They’re also protecting their supply chain physically.

“We ordered a mask machine from China,” Durcan said. “We are actually manufacturing some of our own [personal protective equipment] right now, which we are sharing with our supply chain.”

Lots of firms are also supporting their supply chains financially, said Jeff Pratt, who works on supply chain consulting for BDO. He said his clients have talked with their suppliers about how much cash they need and have made payments if they had to.

“The entire focus was collaborating with suppliers to get through this situation together and not jeopardize those relationships and providing the appropriate cash flow through the supply chain,” Pratt said.

No man is an island, and no business is either.

COVID-19 Economy FAQs

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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