Biden’s Supply Chain Executive Order Should Remind All Business Leaders To Be Prepared For A Crisis

News that President Biden will sign an executive order today requiring a 100-day review of key aspects of the nation’s supply chain is a timely reminder for all business leaders about the importance of being prepared for any crisis situation.

Dr. Aleksandar Tomic, is the associate dean for strategy, innovation, and technology at Boston College’s Woods College of Advancing Studies.

He said Biden’s executive order, “… highlights the need for back-up inventories that can be deployed in the time of crisis. This is not an easy issue for any business as maintaining such inventory and basically introducing slack into their supply chain is costly on day-to-day basis.”

Recent Strains On Supply Chains

Tomic said, “Businesses already have models to deal with recurring emergencies, such as hurricanes (for example see Home Depot’s efforts) and can be very efficient in responding. However, unusually strong and unusually protracted emergencies, such as early days of Covid-19 and the recent Texas storms are different.” 

He noted that when the supply chain “… is squeezed at all points such as was the case with Covid-19 and there is a limit on production capacity compounded with demand surge, it is difficult for a business to ramp up quickly, especially when it is not certain that demand will persist.

“Maintaining sufficient inventory for such occurrences is cost-prohibitive as appreciation for being able to supply the customers quickly gives way to price-consciousness once the emergency subsides,” he noted.

Political Pressures

Tomic observed that the U.S. government “… is in a similar spot where right now no one is questioning the need to maintain stockpiles, but if we have another prolonged period of a relative calm, there will be political pressure regarding the ongoing cost of maintaining capacity, whether stockpiles of finished product or production capacity. However, these pressures are much easier for government to deal with than the price pressure is for a business,” he concluded.

Advice For Business Leaders

Be Prepared

Tomic said his advice for businesses “… would be to prepare for ‘common’ emergencies and for government to take more steps to prepare for ‘extraordinary’ ones. Unfortunately, one lesson is also for businesses to prepare for infrastructure failures of the kind that we witnessed in Texas, as they may be more common, given the state of infrastructure in the U.S.”

No Fair Warnings

“President Biden’s executive order is really reminding companies that emergencies usually do not arrive with fair warning, and that they therefore need to make plans today for the emergencies of tomorrow,” observed Peter Schwartz, a principal at Jibe Consultants.

“From my experience, crisis communication plans are not just crucial for a company’s survival but also very often overlooked. But a crisis communication plan is a necessity for every company, and hopefully the President’s executive order will underscore this fact,” he said.

Schwartz recommended that, “a crisis communication plan must be in place ahead of time to ensure that a company can fulfill it’s mission even in the face of unforeseen and severe challenges.”

Remember Lessons Learned

Tony Nuzio is 45-year veteran of supply chains and logistics and publisher and editor-in-chief of Logistics Strategies. He said that, “If business leaders have learned anything from this crisis, it’s that the global supply chain can change on a dime and relying on foreign businesses to supply the components a company needs to manufactuer its product is dicey.

“I suspect that business leaders are going to look at how they can find the goods they need in the U.S. to combat the challenges faced when the global supply chain can’t perform. “

Have Options

“An air tight supply chain program with a, b, and c plans is critical. You can’t just rely on one avenue,” Nuzio said. “You need to have the plans ready to go to plan b and c and so on. That’s going to take a lot of leg work now to be sure that the chain doesn’t collapse during a crisis. They are going to need to get with consultants, identify more local partners and look at how they can keep extra stock of critical components available.”