Covid forces rewrite of academic textbooks on supply chains and logistics
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When Marshall Fisher recently reviewed the outline of his planned lecture series on global supply chain management at Wharton Business School which begins this month, he realised it required some extensive reworking.
“I swallowed hard, decided to throw away the course and start again,” says Mr Fisher, professor of operations, information and decisions.
He has since updated almost half his 13 scheduled classes with fresh examples linked to coronavirus. “I thought I just can’t teach the same course again. Every time you open the newspaper you see Covid and supply chains.”
The disruption of the pandemic in 2020, coming on top of the uncertainties surrounding US-China trade wars and Brexit negotiations, has helped turn a once specialist topic into a theme of growing concern for businesses, business schools and wider society.
Cross-border trade comprised just 5 per cent of GDP in the mid-20th century but today it is closer to 50 per cent, says Prof Fisher. That has been accompanied by a rapid extension of global supply chains with products and their components often manufactured in numerous countries, driven by cheap labour and easier transport and communication.
“The world has hit the pause button at least on globalisation,” he adds. “Trump and Brexit together have done a lot now with [discussions about] shortages of all kinds of things and economic nationalism. You are seeing a rallying cry for anti-globalism.”
Jeremie Gallien, at the London Business School, says supply chain management used to be perceived as a “somewhat niche component” of the business education curriculum. However, his school has seen growth in demand for its different courses focused on this specialism and has launched a new executive education programme on mastering operational resilience.
“In the aftermath of the first Covid wave, many firms found themselves either fighting for survival or realising the importance of increasing their resilience to reduce the costs they will incur during the next disruption,” he says.
If the emphasis for a long time was on creating lean, efficient supply chains, there is now a fresh focus on “short” supply chains to reduce the risks of disruption between countries, according to Prashant Yadav, affiliate professor of technology and operations management at Insead. Lockdowns linked to Covid-19 have brought this yet more to the fore.
“It is harder to get student interest if one teaches supply chain concepts without being able to relate to Covid-19,” he says. He has long studied applications to pandemic medicines and vaccines supplies, writing case studies including one on the pressures on Roche, the Swiss pharmaceutical company, when it faced a huge surge in demand for its antiviral drug Tamiflu during the 2009 bird flu (H5N1) epidemic.
If students and seasoned executives have become more interested in learning about the field, academics are also refining their research. Prof Gallien says much attention has focused traditionally on the use of mathematical models to analyse individual companies’ trade-offs between customer service levels and cost. Then they explored game theory to understand the mutual benefits of co-operation and improved profitability across the entire supply chain.
Now, he says, there is greater examination of resilience and sustainability, and a shift towards practice-based research, with professors working alongside companies directly with detailed data to solve the challenges they face, develop approaches and test them in practice.
Alongside the importance of agility and resilience in supply chain work, Mr Yadav says coronavirus has brought attention to two previously neglected themes: a greater focus on the role of government and public-sector decision makers, and scope for “horizontal collaboration” between traditional competitors such as vaccine manufacturers and food retailers.
Prof Fisher cautions that calls during the pandemic for a shift away from “just in time” production and for locally-based production in supply chains are misguided. “How much stock can you keep? Maybe enough for a month to help you during a transition phase,” he says. “If you limit yourself to suppliers in, say, the US, all you have done is constrained your supply base.”
Prof Gallien says the main message for organisations should be to examine their operational resilience, to understand the extent to which a supply chain can continue to run with minimal cost in the face of disruptions. “The biggest challenge that firms should take on now is the relative lack of awareness of — let alone metrics on — the financial risk to the business that is associated with different suppliers.”