Yossi Sheffi is a supply chain management expert who moves freely between business and academics. He founded several companies, and he sits on the boards of large corporations. He teaches engineering at MIT and has authored a half-dozen books that are read by engineers, economists, and business people. When I heard about his latest book, The New (Ab)Normal, in which he tackles the covid-19 disruption of the global supply chain, I got a copy as soon as I could, stayed up late reading, and got up early to finish it.
The New (Ab)Normal
New (Ab)Normal was worth it. Sheffi’s insider views are compelling. He has talked with the executives and engineers who struggled to put food and toilet paper on supermarket shelves, produce and distribute medical protective gear, and prevent manufacturing plants from foundering from supply disruption.
Supply chains and the media
Sheffi has harsh words for some media. For example, he says empty supermarket shelves were misunderstood. Food and supplies were never lacking, but they were often in the wrong place. Until the lockdowns in March, a big share of U.S. meals were dispensed in restaurants, schools, and company cafeterias. These businesses purchase the same food as families, but they get it through a different supply network and packaged in different ways.
Cafeterias buy tons of shelled fresh eggs in gallon containers, but consumers buy cartons of eggs in supermarkets for cooking at home. When the eateries shut down or curtailed operations and people began eating at home, plenty of eggs were available, but someone had to redirect them to consumers in a form that was practical for a home kitchen. Sheffi says food shortages appeared in dramatic media video footage and sound bites, but not in supply chains.
Bursty services
Changing buying patterns worsened the appearance of shortages. Supermarket supply chains are adjusted to dispense supplies at a certain rate and level of burstiness. These are terms I know from network and IT service management. A bursty service has bursts of increased of activity followed by relatively quiet periods. At a bursty IT trouble ticket desk, thirty percent of a week’s tickets might be entered in one hour on Monday morning when employees return to work ready to tackle problems that they had put off solving during the previous week. A less bursty business culture might generate the same number of tickets per week, but with a more uniform rate of tickets per hour.
Bursty desks must be managed differently than steady desks. The manager of a bursty service desk must devise a way to deploy extra equipment and hire more staff to deal with peak activity on those hectic Monday mornings. Experienced managers also know that an unpredicted burst in tickets on a desk, say in the aftermath of a hurricane, will cause havoc and shortened tempers as irate customers wait for temporarily scarce resources. The best of them have contingency plans to deal with unanticipated bursts.
Cloud computing to the rescue
The rise of cloud computing architectures in the last decade has yielded increased flexibility for responding to bursts in digital activity. Pre-cloud, managers who had to provide service through activity bursts had to deploy purchased or leased servers with the capacity to handle peak periods of activity. Adding a physical server is a substantial financial investment that requires planning, sometimes changes in the physical plant, often added training and occasionally hiring new personnel.
Worse, the new capacity may remain idle during long non-peak periods, which is hard to explain to cost conscious business leaders. Some businesses are able to harvest off-peak capacity for other purposes, but many are not. Cloud computing offers on-demand computing with little upfront investment, greatly reducing the need to pay for unused capacity to improve service during peak periods.
The food supply
Covid-19 caused an unanticipated increase in the burstiness of supermarket sales. Under the threat of the virus, consumers began to shop once a week or less, buying larger quantities. Folks accustomed to picking up a few vegetables and a fresh protein on their way home from work began arriving at the store early in the morning to buy twenty-five-pound sacks of flour and dry beans, cases of canned vegetables, and bulk produce.
On the supply end with the farmers and packers, the quantities sold per month stayed fairly constant because the number of mouths being fed did not change, but in the stores, by afternoon, shelves were bare waiting for shipments arriving in the night because consumers were buying in bursts instead of their “a few items a day” pattern. This made for exciting media coverage of customers squabbling over the products remaining on the shelves. The media seldom pointed out that the shelves were full each morning after the night’s shipments had arrived and were on the shelves.
Toilet paper
The infamous toilet paper shortage was also either illusory or much more nuanced than media portrayals. Like restaurants and cafeterias, public restrooms took a big hit with the lockdowns. Like food, toilet paper consumption is inherently constant, but toilet paper purchasing burstiness and where the product is purchased varies.
Commercial toilet paper consumption plummeted as shoppers began to purchase consumer toilet paper in the same bursts that they were purchasing food supplies. There may have been some hoarding behavior, but many shoppers simply wanted to shrink their dangerous trips to the market by buying in bulk. Consumer toilet paper is not like the commercial toilet paper used in public restrooms, which is coarser and often dispensed in larger rolls from specialized holders. This presented supply problems similar to food supply issues.
Supply disruption
Supply chains had to respond quickly. Unlike digital services, responding to increased burstiness in supermarket sales required changes in physical inventory patterns. Increasing the supply of eggs by the dozen at supermarkets and decreasing eggs by the gallon on kitchen loading docks could not be addressed by dialing up a new batch of virtual cloud computers. New buying patterns had to be analyzed, revised orders had to be placed with packers, and trucks had to roll on highways.
Advances in supply chain management
Fortunately, supply chain reporting and analysis has jumped ahead in the last decade. Consumers see some of these advances on online sales sites like Amazon when they click on “Track package.” Unlike not too long ago when all they were offered was Amazon’s best estimated delivery date, they see the progress of their shipment from warehouse through shipping transfer points to the final delivery. Guesswork is eliminated: arrival and departure is recorded as the package passes barcode scanners.
The movement data is centralized in cloud data centers and dispensed to the consumer on demand. Many people have noted that Amazon shipments are not as reliable as they were pre-covid. However, the impression of unreliability would be much stronger without those “Track package” buttons.
Supply chain managers have access to the same kind of data on their shipments. In untroubled times, a shipping clerk’s educated estimate on an arrival time of a shipment of fresh eggs may have been adequate, but not in post-covid 2020, with its shifting demands and unpredictable delays. Those guesses can’t cope with an egg packing plant shut down for a week when the virus flares up or a shipment delayed by a quarantined truck driver.
Good news
Fortunately, with the data available today, these issues are visible in supply chain tracking systems. Orders can be immediately redirected to a different packing plant that has returned from a shutdown or dispatch a fresh relief driver instead of leaving a shipment to wait in a truck stop parking lot. Issues can be resolved today that would not have been visible as issues a decade ago. Consequently, supply chains have been strikingly resilient to the covid-19 disruption.
Supply chains were much different in my pioneer grandparents’ days. They grew their own meat, poultry, and vegetables, and lived without toilet paper for most of their lives. Although supply was less complicated, the effects of supply disruption, like a punishing thunderstorm destroying a wheat crop, was as significant as today’s disruptions.
In November of 2020 with steeply rising infection counts, predictions of new supply disruption occasionally surface. The response of supply chains so far this year leave me optimistic that we have seen the worst.