The Effects of COVID-19 on the Supply Chain
Students Name
Institutional Affiliation
The Effects of COVID-19 on the Supply Chain
Introduction
The emergence of the coronavirus pandemic has significantly disrupted and even halted production in several companies. This partly because many companies have been unable to come up with supply chain responses that can prevent the disruption of production. As it stands, the pandemic might affect several businesses and contribute to the closure of several establishments. This article examines some of the responses that can be employed and conducts a case study on 3M to determine what steps are suitable in preventing the disruption of production.
Recommendations
One of the recommendations issued to deal with the disruption of supply brought by COVID-19 includes redesigning with second sources of supply. Having a well thought out second-source provides the backup capability for supply and outages. Moreover, having a backup source distributes the risk of disruption between two sources, which may help prevent the breakdown in production as long as the interruption does not impact the second source location. Therefore, it is essential to have a second source located away from the primary source region to prevent complete disruption of both sources. Notably, having an additional supplier may result in higher administrative and unit costs.
Another recommendation that companies can consider when preventing the disruption of supply that may arise due to COVID-19 is adopting a local approach to sourcing raw materials. That is, companies should actively search for local sources of supply for their production facilities in major markets. This spreads the risks involved and prevents the total disruption of the production process. By sourcing suppliers locally, the sources become dispersed, lowering transportation costs in the process (Rice, 2020). Such simplifications, namely sourcing locally and establishing a second supplier located away from the primary supplier, spreads or reduces risk promoting continuity of production. Specific factors that have to be taken into consideration when redesigning sources of supply include how such efforts will impact competition and customers. For example, will the second supplier be able to maintain the desired quality of the product or are local suppliers up to speed with the company’s standard requirements. Deciding on which approach to take is a critical process and firms should engage in brainstorming processes and analyze or challenge their design processes.
Steps that were undertaken by 3M
Some of the critical success and supply chain advantages that made it possible for 3M to respond to increased demands adequately include the prior purchase of idle machinery installed purposely for such occasions. After the SARS epidemic of 2002-03, the company realized that its manufacturing process was not well designed to handle new epidemic explosions that could trigger crisis level demands. With this in mind, the company undertook revolutionary steps aimed at increasing surge capacity in all of its respirator factories (Gruley, & Clough, 2020). Over the years, several epidemic episodes, such as the Ebola panic and the H1N1 flu virus, generated instances of the surge in demand, that made the company adopt new revolutionary processes to handle instances of emergencies better. After refining their production process for several years, 3M was better equipped to handle surges in demand for important items, such as respiratory masks.
The company also set aside considerable funds to purchase new equipment to handle the unprecedented surge for respirator masks. As part of its preparatory program, the company had a substantial amount of funds reserved to handle instances of an upsurge in demand arising from an “X-factor” event (Gruley, & Clough, 2020). After experiencing soaring demands, during the SARS outbreak, stakeholders in the company realized that the company’s production process was not flexible enough to unexpected changes in demand. Furthermore, recent surges in demand, such as those brought by the H1N1 outbreak and forest fires forced the company to re-strategize on its production process. For example, new assembly lines that would serve as backup were added into the factories, to handle future cases of the surge in demand. To promote continuity of production, the company alerted its suppliers and assembled an emergency response team that would take charge in instances where a catastrophe beckoned. By having an emergency response team and supply chain team, 3M could adequately monitor demand and forecast whether or not they should engage in emergency production.
The ability to source materials nearby and sell to the local markets is also a factor that has enabled 3M maintain its supply chain during the Coronavirus pandemic. Unlike the norm for many companies, where their manufacturing plants are set-up in low-cost countries, 3M sources its materials from regions located close to its production plants and serves markets situated close by. For instance, plants that manufacture respirators in China serve the Chinese market, those that make respirators in Korea serve the Korean market. This eliminates the need to rely on distant vendors who may be limited by tariffs or export bans. Moreover, the company’s commitment to building additional assembly lines in several of its plants has enabled 3M to cope with the upsurge in demand for protective equipment, such as respiratory masks.
Conclusion
The coronavirus pandemic has had a great deal of impact on business operations and production, and it is estimated that some businesses might have to close down because of the issue. The disruption of business operations and supply is one of the main challenges brought by the pandemic. To counter such disruptions, business needs to come up with strategies, such as increasing the number of suppliers or sourcing for materials locally. The article analyzes some of the strategies presented in preventing the disruption to business operations.
References
Gruley, B., & Clough, R. (2020, March 25). Bloomberg. Bloomberg – Are you a robot?. https://www.bloomberg.com/news/features/2020-03-25/3m-doubled-production-of-n95-face-masks-to-fight-coronavirus
Rice, J. B. (2020, February 27). Prepare your supply chain for coronavirus. Harvard Business Review. https://hbr.org/2020/02/prepare-your-supply-chain-for-coronavirus