Wharton@Work

July 2020 | Strategy

Forging a Resilient Supply Chain in the Era of COVID-19

Widespread product shortages due to COVID-19 have catapulted supply chain breakdowns to the front page in recent weeks. From the worrisome dearth of PPE and ventilators in American hospitals to shoppers’ scramble for (and hoarding of) toilet paper, disinfecting wipes, and groceries, the race to obtain necessities has affected nearly everyone.

Even unusual items can become scarce. Kettlebells — cast-iron, handled exercise weights — practically vanished from the market once the coronavirus spread in the U.S. and people started buying up home gym equipment, as reported by GQ in April. Why kettlebells in particular? Kettlebell manufacturers in China were shut down because of the pandemic, and American foundries couldn’t meet the demand.

Anyone overseeing or managing a supply chain today may be facing some of the most difficult decisions of their career. As businesses cautiously reopen or ramp up operations, there are countless unknowns about the track of the pandemic and the economy. How will companies navigate amidst unprecedented uncertainty?

In response to this state of affairs, two Wharton professors of Operations, Information and Decisions — Gad Allon and Santiago Gallino — have crafted the new Wharton Executive Education virtual program Designing and Managing Supply Chains for the Future. Allon and Gallino say they want to help supply chain executives move out of the defensive (or merely reactive) position many find themselves in today and pull ahead of the curve. The program teaches how to create strong, nimble, resilient supply chains that can weather the current crisis as well as future shocks.

Allon provides some background as to how the United States, despite being one of the richest countries on earth, ended up lacking much-needed products during the pandemic. It didn’t happen overnight. Consultants and shareholders have for the past few years been pushing companies to make their supply chains more and more efficient, and companies have responded. “Just-in-time manufacturing and inventory, as well as offshoring and outsourcing, have brought us a very efficient supply chain. But not a very resilient one,” Allon says. Allon acknowledges that predicting the specific dynamics and ripple effects of COVID-19 that we’ve seen so far would not really have been possible for firms.

However, “expecting or believing that your firm should be ready for a 20 percent demand shock and a 20 percent supply shock is not something out of the realm of what we've seen in the last 20 years,” he says, referencing previous disease epidemics, natural disasters, and financial downturns. Gallino agrees, “We tend to think that these events are rare and will never hit us, but if you look closely, we see this happening again and again.” That is why long-term supply chain resilience is critical, the professors say.

Designing and Managing Supply Chains for the Future enables you to take a critical look at your existing supply chain from end-to-end to pinpoint gaps and vulnerabilities. Allon and Gallino show participants how to align their supply chain strategy with their business structure, including financial and marketing strategies. This approach helps executives manage both short- and long-term risk and supports future sustainability.

The program also helps you uncover the potential value of the customer data your company may already be collecting. It explores data analytics, AI, blockchain, and other emerging technologies. Gallino points out that predictive analytics is an especially important tool in the current environment. Since the coronavirus crisis has been spread out over time and different geographies, that yields “an incredibly rich source of data. This disruption is particularly severe on the demand [side, so] getting a good understanding of how the demand is going to behave in a few weeks or a few months out is critical.”

A highlight of this interactive virtual program is a business simulation. Participants are challenged to work through a real-world scenario in which they must allocate production among multiple countries. Teams showcase their work and the faculty guides the simulation to reveal the most effective strategies and best practices.

Above all, Allon and Gallino espouse a holistic view of supply chains, which they say is key to achieving resilience. Allon exhorts supply chain managers to avoid thinking “It’s my supplier’s responsibility [not mine] to be prepared.” After all, your supplier may well be assuming the same thing of their supplier — and the whole chain is put at risk. Allon advises, “Think about supply chains as an end-to-end entity where the goal of every player… is to increase the size of the pie rather than their own slice. If you manage to increase the size of the pie, [all] the slices are going to be bigger.”