Supply chain managers know the importance of being prepared for a wide range of catastrophes, from natural disasters to power grid failures to political strife. But few could have been fully prepared for the devastating impact of the COVID-19 pandemic.
"The changes that took place in our lives were rapid and shocking," said Marcy Alstott, operations executive and senior consultant at California-based On Tap Consulting. "When you think about the supply chain and its reaction to those shocks, that also was shocking."
Speaking to students, faculty and industry leaders at the spring conference of Krannert School of Management's Global Supply Chain Management Initiative, the Purdue alumnus shared her views on the long-term supply chain implications of the pandemic, while providing an overview of America's reliance on China for products.
The conference, held virtually on Feb. 19, was entitled “Supply Chain Resilience in the COVID Age."
"There are lots of lessons in this evolutionary, revolutionary supply chain management world that we live in,"
said Alstott, who works with startups that get products from around the world.
Between 2001 and 2019, the value of U.S. imports from China went up 300 percent, Alstott said, reaching $452 billion.
In 2018, when the Trump Administration began imposing tariffs on Chinese goods, U.S. companies began looking for alternative sources, moving some of their manufacturing to Vietnam. Imports from Vietnam increased from $49 billion in 2018 to $66 billion in 2019.
"Back then, it was difficult to make that move," Alstott said. "Even considering a country like Vietnam, where the labor is less expensive than China, the logistics weren't in place at that time to confidently shift manufacturing in a big way."
U.S. companies could not reduce their reliance on China in time to cushion themselves from the heavy blow that the pandemic dealt to their supply chains. Factories in China closed, air travel froze, and inventories ran out.
"All of us realized that we just did not have the chops to take over manufacturing in the United States," Alstott said.
While manufacturing is on the path to recovery, a lot of uncertainty remains in 2021, she said. She expects logistics challenges to continue, partly because air travel has not returned to normal.
A number of unknowns, including immunization speed, international coordination of vaccinations, and the threat of COVID-19 variants, could affect the economy's recovery.
"We need to stay fast on our feet to be able to adapt to those things, as we understand them better," she said.
Among the long-term implications, she expects to see more automation in manufacturing and logistics.
"Automation is the key and will be a dominant force going forward, both in manufacturing and logistics," she said. "When I'm thinking of automation, it's not just robotics—it's also data, good information and the tools around that. Many of the challenges this year have been around getting good information, understanding where things are in your supply chain."
While bigger companies have more access to automation tools, smaller companies can leverage tools through partnerships, she said.
"Automation will actually position us well to bring manufacturing back to this continent," she said.
Even if it's not located in the U.S., it might be in Mexico, as companies place a higher value on shorter supply chains. "There is an understanding of the risk of a global supply chain," she said.
She also expects to see more investment in the industrial segment in the U.S. "It is critical and there is a crystal-clear understanding of that now, versus back when we were all moving things offshore," she said.
The pandemic has underscored the importance of knowing exactly where supply chains are located, what the risks are, and how these risks can be mitigated, perhaps through alternative sources for products.
"That's never become more clear than after COVID," Alstott said. "Certainly we've learned our lessons with tsunamis and floods and things in the past, but now, more than ever, we need to know where our supply chains are located and have contingency plans in place."
