An unprecedented interruption in the global supply chain is testing the system mightily. Inventories of everything from vital medical supplies to household staples like toilet paper are in high demand, causing panic up and down the chain.
Barbara Hoopes teaches a course on the global supply chain in the MBA program at Virginia Tech. “I really do think that supply chains are having their 15-minutes of fame right now. People are all of a sudden aware of how goods and services get delivered to them, when we really have just paid very little attention to that.”
Take toilet paper, which is produced right here in the U.S. “And still we can’t get it to the shelves effectively when there is irrational behavior taking place in the marketplace,” Hoopes notes.
Hoopes says there’s no shortage of the stuff in any part of the supply chain, not the raw materials or on the production line. But because demand has skyrocketed amid this pandemic, it has caused what they call in the industry, the ‘bullwhip’ effect.
“So right now, there is not stock on the shelves. When we do find it, people tend to be overbuying. So that means they won’t have to buy it again for, I don’t know, six, eight months?” But since there is no actual lack of toilet paper when the product is back in stock, demand for TP will drop because people have stocked up. That’s when the ‘bullwhip’ swings back around from understock, to overstock. Hoopes says it’s not a new phenomenon, but; “It is particularly fierce right now, simply because of the conditions under which we’re operating, which are relatively unique.”
Localized disruptions are nothing new; storms and other surprises can stop shipments from getting through, but this COVID-19 Pandemic is causing a ‘domino effect’ as it rampages around the world.
“So, just as China is coming back online, bringing their workers back to work, getting the ships going over the ocean again with goods in them, markets around the world are shutting down.”
Goods are not getting where they need to go, and vital supplies are not easily available where they are needed most. Hoopes says global supply chains play by the rules of ‘cost effectiveness.’ and that in light of current events, it may be time to add more resilience to the game, something Hoopes says, would likely increase costs.
***Editor’s Note: Radio IQ is a service of Virginia Tech