Three Keys to Revving Up and Maintaining a Supply Chain During a Pandemic
Insider knowledge of reliable sources, prior relationships with logistic providers, and getting ahead of the warehousing issue. These are keys to keeping a stream of goods flowing constantly during a pandemic — or anytime for that matter.
Editor’s note: In April of this year, New York City was in full grip of the COVID-19 pandemic, reaching a peak average of 5,426 new cases per week on the 15th. In that same month, with personal protective equipment (PPE) for frontline workers growing scarce, city officials engaged FTI Consulting to help source, vet and recommend qualified suppliers for more than 10 different categories of PPE. Based on FTI’s experience, China-based manufacturers proved to be ideal partners, and the firm was able to establish supply chain operations that stabilized long-term inventory for the city.
The People’s Republic of China has been the leading source of low-cost manufacturing for U.S. companies across many industries for almost two decades now. Although trade and tariff tensions between the two nations have lately strained this mutually beneficial relationship (and caused some American firms to consider other sources), China’s scale and well-developed infrastructure make it the gold standard for low-cost manufacturing.
Identifying reliable sourcing partners is typically a first step when considering a supply chain. But other factors should be taken into account if not simultaneously then very soon after to keep the pipeline full. Consider logistics: How are you going to get the goods from the plant to the ports, and who will handle customs clearances along the way? Consider storage: Where are you going to warehouse goods, and how frequently will stock be replenished?
These questions were particularly acute for New York City in April. But in fact, they are common supply chain challenges — pandemic or not. To rev up and maintain supply, it helps to have insider knowledge, prior relationships and a solid grip on all variables across the entire value chain. Here’s a look at how these three elements interact.
Who’s Making the Goods? (Sourcing)
Having a local expert on the ground with insider knowledge of manufacturers and their capacity speeds the selection process for scale, dependability, quality and cost. A variety of manufacturers to choose from is important so that if one falls through at any point, others can be slotted in to keep goods flowing.
A thorough cost analysis is essential to help narrow down a list of contenders prior to negotiations. So is knowing the production and quality history of a manufacturer. Early in the pandemic, for instance, some established PPE manufacturers in China were available, while others with a history of producing other goods, such as automobiles and air conditioners, converted to tap into the market (and serve the public good). Did this necessarily eliminate the latter as a potential source? No. The quality of their PPE goods in many cases was deemed excellent.
How Are You Moving the Goods? (Logistics)
The logistics issue covers every aspect of transit and shipping, from source to shelf. It is possible to engage multiple carriers for this task, but a single “freight forwarder” that can handle everything — including customs clearances — is sometimes more efficient and convenient. (FTI’s ability to appeal directly to top management of various freight forwarders to join the New York cause resulted in a single partner handling all aspects and expediting much of the above.)
Transporting by ocean freight is far more economical than air freight. However, in a situation that calls for rapid response, the need for certain efficiencies may temporarily override cost consideration at the onset. In New York, for instance, chartered air freight was initially the only viable transport option, given the critical need to quickly replenish depleted stockpiles of PPE. In fact, more than 18 air freighters, ranging from approximately $650,000 to $1 million per flight due to tight capacity, were chartered to speed up delivery and stockpiling.
As stockpiles begin to build, ocean freight becomes the more logical alternative. Going forward, a mix of air and ocean freight may be optimal to maintain a steady flow of goods.
Where Are You Storing the Goods? (Warehousing)
Easy to overlook, but highly critical, is the question of where to house supplies as they start arriving. Storage space is at a premium in America given the surge in retailers and food and consumer goods suppliers beefing up their e-commerce operations.
In dense New York City, the sheer volume of critical supplies to be warehoused — and the speed at which they poured in — made for a unique challenge. The requirement to manage and store such a volume of PPE was unprecedented due to the pandemic, and quick, creative thinking was required to find a solution. Sympathetic partners helped by clearing out nonmedical products in their facilities to make room on a stop-gap basis. (A more sustainable solution emerged when traditional third-party logistics partners and medical product distributors outside the city became critical supply chain partners.)
Clearly, the anomaly of a pandemic will drive certain solutions. In response to New York’s disparate sets of systems and data tracking, FTI developed a proprietary inventory management tool kit to provide a real-time view of inbound freight and stockpile levels. As of this article, 27 weeks and counting, the City of New York has been on the receiving end of 17 million pounds of PPE.
As with establishing any supply chain, the to-do list for New York included cutting through governmental red tape and managing the regulatory environment. But as anybody who has tried to establish a consistent and efficient supply chain knows, experience, expertise and relationships go a long way toward mitigating those issues — and getting the job done.
© Copyright 2020. The views expressed herein are those of the authors and do not necessarily represent the views of FTI Consulting, Inc. or its other professionals.
Senior Managing Director, Leader of Asia Business Transformation
Senior Managing Director