TAMPA — In the world of supply chain management, the trillion-dollar business of moving goods from producer to consumer, some executives compare the COVID-19 pandemic to the regulatory stress tests that U.S. banks must undergo to assess their ability to survive a crisis.
“It’s just like you would go into a bank, run an audit and look at the stress on their finances,” says Donna Davis, the academic director at the Monica Wooden Center for Supply Chain Management & Sustainability at the University of South Florida.
But from toilet paper to protective masks to fresh produce, the stresses vary from case to case and place to place — and so do the responses, Davis says. The Tampa Bay Times spoke with Davis last week about the bright spots in the supply chain, how lead times for delivery have been affected and the weak spots that worry her.
Here’s the conversation, edited for length and clarity:
How do you think supply chains have handled this health and economic crisis?
It is a stress test for just about every supply chain, but in a lot of different ways.
So if you look at, for example, the clothing or textile supply chains, you’re seeing a dramatic shrinkage of overall activity, and they’re having to manage that.
And then if you look at what happened in that same period of time in food or personal products — like toilet paper — you saw this huge demand shock before the lockdowns. Everybody wanted to stock up, so some supply chains that had been chasing demand then turned and they were chasing supply.
The Institute for Supply Management surveys 550 of their members and other folks in the industry to see what’s happening and they do this every other week. For the first two weeks in March, respondents were immediately reporting longer lead times from China. They were up 8 percent over February. In the latter part of March, they were seeing longer lead times from Europe and North American countries.
Anecdotally, in my conversations with people in the industry, they’re saying, ‘We’re taking a tremendous hit in revenues’ because there are less goods moving because of the demand side.
E-commerce is up, especially if they’re exclusively in e-commerce, like Amazon, while others are seeing the drop to nothing. We’re going to see, I think, huge retailers either closing or consolidating. It’s a double-whammy: It’s people being under lockdown, but now also people being unemployed. We’ve got less money flowing in the economy, and that’s going to take longer to bring back than some companies can withstand.
Have there been bright spots?
We’ve been able to maintain the food supply chain.
There’s a lot of conversation around that right now because of the problems in the meat-packing plants. I saw on the news last night you can’t get a burger at Wendy’s. I think that’s a short-term problem. They will figure out how to retool those plants so they can operate safely and we’ll get back to business in the meat supply chain.
The produce supply chain seems to be going well. I was talking with Wade Elliott (vice president for business development) at Port Tampa Bay yesterday and I asked him because they import a lot of produce. He said, not a problem. That’s good to hear. The produce supply chain has been able to stay intact. We did see the unfortunate pictures of produce getting plowed under because institutional buyers — schools and restaurants that are pretty significant parts of farmers’ income — were not buying. Since then, some companies like Publix stepped up and said we will buy the produce and we will send it directly to the food banks. That’s a big bright spot for me.
If you looked at what was happening for two or three weeks, it looked pretty disastrous. You saw milk being thrown away and produce lying in fields. Now they have actually re-engineered their supply chains to fix that.
How about weak spots?
The one that is still a puzzle that we’re going to have to figure out soon is personal protective equipment and being assured that we can get what our front-line workers need. And when I say front-line, I’m talking about doctors, nurses, first responders, but also the people in the grocery store that are serving you. So the question is where are we going to get that personal protective equipment? I have not seen that supply chain really work very well yet.
The other one that you hear about on the news every day is the tests. We’re not going to feel safe until we have a good testing regimen in place, and we know that there are enough tests out there and they have the equipment that they need. You were hearing we can’t get enough swabs because they were imported from Italy, and Italy was closed down. USF is one of those places where we developed and are producing a 3-D printed swab.
Since I think like a supply chain person, I’m thinking, if we can get that infrastructure in place to conduct the testing the way we need, that’s the same infrastructure that could be used when we have a vaccine.
Do you have worries apart from health care?
The other one is you can’t really reopen your economy very much if you can’t reopen your schools, because so many workers rely on schools for childcare.
K through 12 is in the same situation as colleges and universities. We’re just kind of waiting, but you can’t wait too long. So we’re going ahead and planning for all eventualities — from (teaching) completely online through the fall to some limited face to face and and then being ready to be flexible. We have to be ready to dial that back pretty quickly if we start to see a lot of health problems. So that is a service supply chain but it’s still a supply chain. Getting the schools ready to re-open has been a challenge, and is going to continue to be a challenge.
Florida imports more than it exports. Are you hearing that the state is getting what it needs to keep going?
If you look around the state, you see a decline in economic activity, but what I’m hearing is overall, yes, we’ve been able to get what we need. We are blessed with a lot of distribution centers for major companies on the I-4 corridor and they’ve been able to maintain their inventories to keep up with what needs to be delivered for consumer use.
With some businesses being allowed to start to reopen, and assuming that others may follow, are supply chains generally in a position to respond to the uptick in demand?
We talk about supply chains in terms of flows, so it’s like a river. The levels rise and fall, and as (business activity) was coming down, it left a bunch of inventory stockpiled throughout the supply chain. Now some things you can’t stockpile, like you can’t stockpile fresh spinach for salads at a restaurant.
So immediately they’ll be able to draw on those inventory reserves. After that, you’ll see a slowdown because the lead times are too long to back-fill those inventories very quickly. So there will be some things that will be a little bit spotty, but overall, supply chain managers are just incredible foragers. They’ll be out there around the world looking to find supply, and then figuring out how to get it transported to the point of use, wherever it is.
In the immediate term, as they start coming back, it’ll help with drawing down inventories. That’s a good thing for the economy, because as inventories start to fall, production starts up again. I call that restarting the engine.
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