April 5, 2020
The recent COVID-19 outbreak has popularised the term ‘supply chain management’ due to the unprecedented, rapid and devastating effects that such a pandemic may cause for supply chains that literally keep society functioning. For example, around 95% of the most powerful American companies have reported significant disruption to their supply chains due to the coronavirus pandemic.
How to ensure that key supply chains – such as those related to healthcare and food – are able to cope in this situation is now a familiar preoccupation for the Government, the media and general society. Supply chain management is concerned with ensuring that goods and services can flow from suppliers to end-users, transforming raw materials into the products and services that society values the most, ensuring that customers’ needs are met.
Domestic Supply Chains rely on nation-wide processes, suppliers and manufacturing; while Global Supply Chains tend to be much more exposed to disruptions, due to having relocated key manufacturing process to overseas sites, and relying on international suppliers of raw materials and components.
The sustainability of supply chains depends on how supply chain management simultaneously considers profit, people and planet – the three dimensions of organizational sustainability. The most visible effects of the disruptions to supply chains being caused by COVID-19 tend to be easily seen on the financial side of supply chains: lack of available consumer goods in stock; the price of essentials going up; increased demand for essentials as a consequence of panic buying; difficulties for companies which have offshored their operations in obtaining the necessary raw materials and components in time to face the crisis.
For example, shortages of medical protective equipment, and potentially medicines, are the most visible aspect of a lack of economic sustainability in modern supply chains. For instance, 80% of active pharmaceutical ingredients used in the U.S. pharmacological supply chain are imported from countries currently in lockdown, which may affect their production capacity.
However, COVID-19 is not only preventing supply chains from delivering the economic benefits they promise; it is also affecting the social and environmental performance that supply chain managers have fought so hard to achieve. Although less visible, the devastating effects that the COVID-19 pandemic may have on the social and environmental dimensions of excellent supply chains are worth noting.
In terms of the social dimension of supply chains, it is paramount that supply chains which are under pressure – such as health, pharma, and food & drink chains – ensure the safety and protection of their key workers. Also, as COVID-19 is gaining significant attention from the media and law enforcement bodies, it is essential that supply chains around the world maintain high social and human rights standards, avoiding the use of the crisis as an excuse for reducing human and labour rights within supply chains.
As global supply chains have suppliers located in multiple nations, it is important for the strongest and most central companies in a supply chain to support smaller suppliers, who may be struggling financially, putting jobs at risk. Of course, gig economy supply chains may face labour-related social challenges regarding the protection of key workers’ – such as deliverers – income and safety during the pandemic.
Social issues can also emerge when central companies in a supply chain are considered by the government to be ‘non-essential businesses’, which generates significant job insecurity for many employees, particularly in the case of large companies in small towns, as these companies tend to have a massive impact on their local economies.
Nonetheless, the COVID-19 pandemic may also affect how green supply chains are. While sustainable supply chains of excellence embrace green best practices, such as the distribution of greener consumer goods, less polluting logistics practices, recycling and circularity of items, the current pandemic has forced supply chains to attempt to keep higher inventory levels of raw materials and final products, which can of course lead to waste and loss of items due to damage and products going out of date.
Specifically, hospital supply chains are expected to generate increasing levels of medical waste. Panic buying and stockpiling can cause significant difficulties for supply chain managers in forecasting demand, and can also contribute to unprecedented levels of household waste. Finally, green supply chain practices, such as recycling, have been disrupted as city-level governments around the world consider these services to be non-essential.
COVID-19 has shown the vulnerability of supply chains in delivering business goals to their consumers; however, it is important to also consider the hidden effects it can have on the social and environmental performance of supply chain management.