Companies scramble to protect their supply chains

Sabri Ben-Achour May 29, 2020
Heard on: Marketplace
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

Companies scramble to protect their supply chains

Sabri Ben-Achour May 29, 2020
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

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

How many people are flying? Has traveled picked up?

Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.

How are Americans feeling about their finances?

Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.

Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.

What’s going to happen to retailers, especially with the holiday shopping season approaching?

A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.

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