As we know, during the COVID-19 crisis, the availability of certain products has been limited. And deliveries have been cancelled by sellers; and sometimes delayed. Even Amazon experienced problems. In planning for the future, better handling supply chain disruptions is a must.
We last wrote about supply chain disruptions in December 2019: Handling holiday Returns.
Better Handling Supply Chain Disruptions
In his recent MIT Sloan Management Review article, Yossi Sheffi makes several thought-provoking observations. Highlights include:
When companies cannot meet the full demands of their customers, leaders need to set clear decision criteria and the mechanisms to back them up.
The COVID-19 pandemic upended normal life and many supply chains. Between hoarding (such as toilet paper), unexpected demand surges (such as yeast, for baking), and spot supply shortages (because of factories or warehouses closed due to infection or mandate), some products were/are in short supply. The most tragic examples involve shortages of ventilators, personal protective equipment, and pharmaceutical supplies required to care for people infected with the coronavirus.
When disaster strikes, suppliers, original equipment manufacturers, and retailers may find that they cannot offer all their products. Or fulfill all their customer orders. They must decide who gets what. But how?
Sheffi outlines six possible approaches. They each have pros and cons. And each is fully described in his article.
- Favor the most important customers.
- Maximize short-term revenues.
- Treat everyone equally.
- Shape demand.
- Alter products.
- Take care of the vulnerable.
Finally as the chart below shows:
As companies consider their options for dealing with supply shortages, they need to consider both the scope of the analysis and its time horizon. How will their choices play out for both themselves and their customers in the short and long terms?