Meet Lance Saunders, assistant professor at the University of Tennessee’s Haslam College of Business, home of the Global Supply Chain Institute. Saunders holds a Ph.D. in Management Systems. His research has been featured in the International Journal of Logistics Management and the Journal of Purchasing and Supply Management. In 2020, Saunders helped oversee an effort to advise five major corporations on how to best weather supply chain challenges caused by COVID-19.
Recently, UT’s Global Supply Chain Institute was enlisted to assist five leading organizations on how to address the supply chain difficulties caused by COVID-19. Can you describe those challenges?
Typically, if a supplier runs out in a given supply chain, there are ways to keep the supply chain running. The problem during COVID was that it wasn’t just upstream supply in which we were seeing volatility with suppliers. And it wasn’t just downstream—customers doing crazy things that led to demand going nuts; it was all of the above. And it wasn’t just in one geographic region, it was all over the world. It hit that same time, so it wasn’t regionalised. A supply chain can deal with a hurricane in Louisiana or an ice storm in Texas; it might be painful, but it can be managed. But with the pandemic, every global supplier had the same issues. This made for the perfect storm for a lot of these companies.
Think of Hurricane Katrina and the levees that were built to weather a storm but were just destroyed. That’s what happened with supply chains during COVID. Companies had measures in place for disasters—inventory, excess capacity, dual suppliers—a lot of different mechanisms that were in place. Those were the levees. What happened in COVID is that those ‘levees’ weren’t big enough, and for a lot of companies, the levees broke.
How was the Global Supply Chain Institute able to help with these challenges?
As a rule, companies are resistant to benchmark each other because it’s seen as a potential advantage that they could unwittingly provide their competition. However, at GSCI, we talk to a lot of companies. We also have a lot of faculty that have worked with major corporations to elevate their supply chain management. Consequently, we as an institution can wade through a lot of information and understand it quickly. When COVID hit, we had these benchmarking sessions with our advanced supply chain collaborative companies, where they would come in and talk about the real-time challenges they were facing. This collaboration allowed GSCI to be a safe place for companies to share their insight and to uncover and contrast trends in a way that very few places can.
In high level terms, how did you apply SCM methodology to assist these major companies?
One strategy we offer is simulation. See, we have all these levers available to us in the supply chain, but they’re all really expensive to implement. So the simulation methodology allows companies to avoid saying on a whim: ‘Hey, what happens if I increase my inventory or decrease my inventory by 10%?” That’s a really costly decision to make, just to see what the repercussions are. Conversely, simulation is really low cost: if we can simulate the supply chain in a way that validly represents an organization’s actual supply chain, now they have a low cost test environment.
Ten years from now, should we have another event that disrupts the global supply chains to the extent of the current pandemic, where would you say companies are most and least vulnerable?
We found that where companies started making predictions at the SKU level is actually where they were the most vulnerable.
Supply chain would be very simple if we didn’t have this little thing called ‘variability.’ If I’m a manufacturer and I knew I had to plan for 100 widgets a month, it would be pretty easy, but the reality is that it might be somewhere between 75 and 125 widgets. And so it’s more complicated, especially on a mass scale, when you start to introduce a variety of widget types. Then, if you consider a product that comes not only in a variety of models, but styles as well (like the iPhone, for example), you begin to understand how variability can really tax a supply chain and make it impossible to predict precisely.
How would you advise the next generation of supply chain managers to build agility and resilience into their supply chains?
One of our partner companies described it well. He said, “After working with you guys, we realized that when volatility increases, if we can utilize planning, it can allow us to almost weaponize our assets.” And it’s true, planning can give organizations a competitive advantage.
When COVID hit, volatility was so prevalent that we had to think about how to alter our supply chain to adjust to this new unpredictable form of demand.
Consider this example: my family goes grocery shopping once a week. We can strategically plan to buy what we need, no more, no less. But when we go on vacation with my wife’s family, there’s nine grandkids, and all these brothers; my mother-in-law also plans her groceries at the beginning of the week. But what happens by the end of the week? We have a fridge full of stuff we didn’t use and we have other things that ran out in about three days. The same is true for companies during unpredictable times. If you’re a large supply chain organization trying to survive a pandemic-like scenario, you shouldn’t plan for the whole vacation. Instead, plan for two or three days at a time. See what’s happening and then adjust. During COVID, companies that fared the best had the sense to say “Okay, I’m going to plan less. I don’t want to make SKU level decisions until I absolutely have to.” Instead, they made SKU-level decisions to be made based on what’s actually happening. And that paid off.
Do you have any parting words of wisdom for companies regarding how to weather the next major supply chain disruption?
Be flexible. Adjust to trends in real-time. Don’t sit on what has been done because what has been done, historically, may not be appropriate for what’s happening now. Instead of looking to the past for guidance, understand how you can reduce variability as much as possible. And do it quickly.
Lance Saunders is one of the premiere supply chain industry experts in the field, allowing GSCI to deliver actionable insights to our students and partners. Helping global organizations navigate supply chain challenges is one of the ways the Global Supply Chain Institute supports the world’s supply chain leaders. Learn more about partnering with the Global Supply Chain Institute at the Haslam College of Business.