Given recent supply chain implications of the coronavirus outbreak, MIT CTL researchers have responded with observations and advice for companies.
Reinforcing Supply Networks - Jim Rice writing in Inside Story
The question at hand for most organizations now is how to restart, to reconstitute your operations back towards what will surely be a new normal. If your company is working as part of a critical network to satisfy heightened demand for PPE, food, medical, sanitizing suppliers – your challenge is different than those firms operating at significantly reduced capacity. Let’s focus on those organizations that are not part of the critical network as this is the majority of firms and their challenge entails the more uncertain and perilous path. Read more.
Uncertainty & Resilience: Responding to Coronavirus and Other Disruptions - Professor Yossi Sheffi's talk at Crossroads 2020
Are You Prepared to Manage a Whack-a-Mole Recovery? - Yossi Sheffi
Pressure to reopen the world’s economies is intensifying. However, hasty reopenings will likely spur waves of resurging infections in location after location, followed by more closures and quarantines.
Global economic recovery after the pandemic-imposed shutdown, therefore, is not likely to be V-shaped, U-shaped, L-shaped, or W-shaped. Instead, as the number of infections, hospital admissions, and deaths cycles up and down, chaotic cycles of economic rebirth and relapse will plague businesses and their supply chains. Read More at MIT CTL Medium
An emphasis on the local
“Alexis Bateman, director of the MIT Sustainable Supply Chains program, said that empty shelves in supermarkets have pushed consumers to look locally for their food — as evidenced by a surge in community-supported agriculture. It’s a clear opportunity for consumers ‘to double down on farmers' markets and locally produced food,’ she said.”
The need to embrace the digital transformation (DT) of supply chains remains critically important for companies, but as is the case in most areas of business, it is being shaped by the COVID-19 crisis. In some respects, the imperative to pursue DT is even more urgent in light of the pandemic and its repercussions. Also, the crisis has significant implications for the way artificial intelligence (AI) — a core component of DT — is deployed in the supply chain domain. Read more on the MIT CTL Medium
Bloomberg: Coronavirus Reveals Vulnerable Supply Chains. MIT Professor Yossi Sheffi speaks with Bloomberg's Scarlet Fu and Romaine Bostick on the collapse of the food supply chain and the crash in oil.
Vox: The U.S. won't run out of food during the Coronavirus pandemic. Prof. Sheffi spoke with Nicole Narea of Vox. “We admire the way that the system works. The virus is still moving from state to state and it’s not uniform all over the country, so the demand patterns are changing all the time. But at the end of the day, we don’t see it as a real danger that we will run out of food.”
The Christian Science Monitor: No, we’re not running out of food. It just looks that way. Chris Mejía, Director of the Food and Retail Operations Lab (FaROL), shares some good news: "I am very certain we are not going to run out of food."
“‘It’s human nature to worry about things that are a mystery to us,’ he says. The “black box” aspect of the food system “creates uncertainty. And uncertainty leads to hoarding and fear.”
CGTN: The growing push to re-open the U.S. economy. CGTN's Roee Ruttenberg spoke with Yossi Sheffi, professor at MIT and director of the Center for Transportation & Logistics, about reopening the U.S. economy.
The Washington Post - PostEverything: Perspective: Many parts of America have already decided to sacrifice the elderly. - MIT CTL AgeLab's Joseph Coughlin and Luke Bryant Yoquinto
The U.S. has a patchwork of social-distancing rules. The weakest ones exist where older people live. For a tense moment last month, talk of a grim Faustian bargain was in the air. The hypothetical deal — voiced most prominently by Texas Lt. Gov. Dan Patrick (R) — would involve restarting the economy while possibly sacrificing those most vulnerable to COVID-19, including older Americans. “No one reached out to me and said, ‘As a senior citizen, are you willing to take a chance on your survival in exchange for keeping the America that all America loves for your children and grandchildren?’ ” Patrick told Fox News Channel’s, Tucker Carlson. “And if that’s the exchange, I’m all in.”
Just-in-time principles have hampered hospitals responding to the coronavirus pandemic, and it will take government action to fix the problem over the long term.
Yossi Sheffi spoke with Yahoo! Finance about how the just-in-time model and supplier diversification in light of the coronavirus:
“For many companies, changing the entire model just doesn’t make sense. As Yossi Sheffi, director of the MIT Center for Transportation and Logistics, told Yahoo Finance, there are just too many advantages of “just-in-time” that go beyond cost. There are more speed and agility, but also more quality.
When an auto production line experiences a problem with a part, for example, you have a pile of parts and swap a new one in. But with just-in-time, ‘you stop the line, find out what's wrong, and fix it,’ Sheffi said. ‘Low inventory helps people find out what's wrong.’”
Our research shows that past disasters can reveal much about the importance of scenario planning. US-based cell phone company Vaxxon has suffered a 45% drop in its stock price, is facing costly legal action from suppliers and customers and looks set to miss a make-or-break opportunity to revive its fortunes with the launch of a new phone. The company’s problems began when the outbreak of a deadly virus in China crippled suppliers in that country. As fears of a pandemic swept through global markets, Vaxxon failed to implement an effective response. Will Vaxxon survive the crisis?
Prof. Yossi Sheffi spoke to Mother Jones about the US government's efforts to manage medical supplies and supply chains amid the pandemic:
“Trump had a lot of people to choose from, says Yossi Sheffi, director of the MIT Center for Transportation and Logistics and a supply chain expert. ‘There are many, many competent people around,’ he says. ‘We have some of the largest companies in the world who are running global supply chains [and] have contractor relationships all over the world. There are literally thousands of them. Any of them would be doing a better job than a crackpot economist’ [Peter Navarro].” Read the full article here.
Professor Yossi Sheffi quoted on Quartz, "The next several of weeks will be telling for the US, as the virus reaches further into farming communities and a true picture of their preparedness is revealed. As the food supply chain waits for that to happen, it will be important for consumers to keep the situation in context, says Yossi Sheffi, a professor of engineering systems at the Massachusetts Institute of Technology.
“Food is grown all over the United States, it’s not likely that all these farming communities will be hit at once,” Sheffi says. “Some will be hit harder than others.” The current situation, and the possibility of disruption in the food system, has Sheffi recalling his childhood in Israel, where his family experienced temporary shortages of certain foods. During an egg shortage, for instance, his mother would have him eat seven olives a day because she believed they collectively had as much protein as an egg. Sheffi’s point is clear: For the average consumer, intermittent shortages of specific foods won’t be devastating."
Prof. Yossi Sheffi: Their Finest Hour - Supply Chain Professionals Bring It "As people hunker down in their homes to isolate themselves from the COVID-19 pandemic, an army of dedicated professionals keeps the country’s food supply chains humming under trying conditions. The army is made up of distributors’ employees, fulfillment center personnel, logistics planners, pallet manufacturing crews, procurement professionals, transportation brokers, truck drivers, truck stop attendants, warehouse workers, wholesalers, and countless other specialists. They make sure that food flows to supermarkets and other retail outlets as well as to e-commerce fulfillment centers, even though media images of empty shelves tell a different story." Read more
Professor Yossi Sheffi, quoted on Vox: Your coronavirus grocery questons, answered by experts
“I keep hearing there’s plenty of food, so why does it feel like grocery stores are suddenly out of everything?
“First of all, says Yossi Sheffi, a professor of engineering systems at MIT and the director of the MIT Center for Transportation, they’re not really out of everything — stores, for the most part, are still pretty well-stocked. ‘If you go in the morning, you’ll see stores that are full of stuff,’ he says. It’s just that some of that stuff is selling out very, very quickly, and it takes suppliers time to respond to the change in demand.” Read the full article here.
The Freightvine Podcast - Freight Transportation & the Coronavirus: This episode centers on the coronavirus (COVID-19) and how the outbreak which originated in Wuhan, China in December 2019 is impacting global freight transportation. Host Chris Caplice sits down with Yossi Sheffi, MIT professor and Chris’ boss at the MIT Center for Transportation & Logistics, to discuss how the coronavirus differs from past crises and how the bullwhip effect will likely play out in this scenario. Listen to the podcast here.
Bloomberg - Supply Chain Collapsing from Coronavirus: MIT Professor Yossi Sheffi speaks with Bloomberg's Scarlet Fu and Romaine Bostick on the collapse of the food supply chain from the coronavirus. View the report here.
Yossi Sheffi quoted in Vice News, “The FDA cannot get out of its own way. Why doesn't the FDA just say, ‘Okay, let's use what the Brits are using, what the Canadians are using, what every normal country is using?’” said MIT Professor Yossi Sheffi, who advises hospitals on supply chain management. “They think that only N95 works? I mean, this is insane at this time, it's insane. It's like you're fighting a war, and somebody comes from the outside and says, ‘I can give you some guns and tanks and airplanes.’ And you say, ‘No, let me develop my own.’”
Sheffi said, as a result, hospitals are terrified they’d be sued for buying these suboptimal masks to outfit their staff — and they might be right. That’s why the government needs to step in and give them certain that they wouldn’t be liable.
“We live in the most litigious society on Earth. I mean, they'll go bankrupt for sure,” Sheffi said. “If the nurse is using a handkerchief to cover her mouth, and something happened, it's the nurse's fault. If the hospital orders 100,000 masks and one person dies or something bad happens then it's the hospital that is on the hook.”
Professor Yossi Sheffi speaks with WCVB in Boston
Listen to the podcast - Yossi Sheffi discusses how Coronavirus takes its toll on supply chains. He speaks on Bloomberg's podcast "What’d You Miss This Week", which goes through a financial market week for the history books. He goes through how to expand the U.S. health care system’s capacity and how necessary activities like grocery shopping can be done more safely amid the outbreak.
Also, in the podcast Scott Minerd, global chief investment officer at Guggenheim and Jeffrey Rosenberg, senior portfolio manager for systematic fixed income at Blackrock, discuss the economic fallout from coronavirus and what governments and central bankers should do to respond. Also joining, Diane Swonk, chief economist at Grant Thornton, came on alongside Nick Maroutsos, global head of bond at Janus Henderson, to offer their thoughts on potential policy prescriptions to offset the impact.
As countries shut down, stock markets crumble and economic activity slows to a crawl, it is hard to believe that in a few months the coronavirus crisis may be over. Bigger, well-capitalized companies have the financial strength to withstand the rapidly developing downturn, but most other companies are in tougher situations and survival for many will come into question. However, it is not too early for companies to think about how to position themselves for a successful, speedy recovery.
To do that companies must look deep into how they manage the most basic mechanisms of their supply chains and operations. One of the most important short-term goals is to conserve cash as the world heads into what could be a significant recession. For supply-chain managers, this means four basic things:
Increase days payable outstanding. This is the average time that a company takes to pay its bills.
Reduce days sales outstanding. This is the average time that receivables remain outstanding before they are collected. In simple terms these two initiatives mean longer payment terms for suppliers so the company can keep its cash longer, and collecting money owed from customers as early as possible. Companies should strive to balance DSO with DPO on every project.
Reduce days of inventory on hand. Inventory ties up cash. Even in today’s just-in-time inventory management systems, most companies accumulate too much inventory. The favorable business environment over the last decade encouraged companies to focus on customer service and use large inventories to reduce out-of-stock situations.
Defer capital expenditures and even use force majeure clauses to get out of contracts with long-term paybacks.
The MIT Industrial Liaison Program hosted a special highlighting the impacts of COVID-19 on business. The webinar consists of three sections where professors Yossi Sheffi, Alex Pentland, and Andrew Lo give presentations.
As the coronavirus continues to spread and the number of infections surpasses 100,000 worldwide, the MIT Center for Transportation and Logistics (MIT CTL) took another look at how companies are responding.
Alexis Bateman interviews Yossi Sheffi on resilience and preparedness for Supply Chain Dynamics - SC3x.
Yossi Sheffi discusses the threat to global supply chains posed by the coronavirus outbreak. He speaks with Bloomberg's Scarlet Fu and Joe Weisenthal on "Bloomberg Markets: What'd You Miss?"
Jim Rice writes in Harvard Business Review:
Developing a cogent supply chain response to the coronavirus outbreak is extremely challenging, given the scale of the crisis and the rate at which it is evolving. The best response, of course, is to be ready before such a crisis hits, since options become more limited when a disruption is in full swing. However, there are measures that can be taken now even if you’re not fully prepared. And although its long-term consequences have yet to fully play out, the coronavirus outbreak already provides some lessons about how you can better prepare your company to deal with future large-scale crises.
Yossi Sheffi writes in The Wall Street Journal:
As scientists race to develop a cure for the coronavirus, businesses are trying to assess the impact of the outbreak on their own enterprises. Just as scientists are confronting an unknown enemy, corporate executives are largely working blind because the coronavirus could cause supply-chain disruptions that are unlike anything we have seen in the past 70 years. For now, the best course of action for companies is to analyze possible outcomes in the context of known supply-chain risks based on historical precedents and to take precautionary measures that minimize exposure to future disruptions.
Yossi Sheffi joins CNBC's “Squawk Alley” to discuss how the coronavirus outbreak could hurt global business.
Yossi Sheffi writes:
It is widely expected that the year 2020 — and the new decade it heralds — is going to bring dramatic changes to global supply chains and that China will be a leading actor in this ongoing drama. But no one foresaw China’s role as the epicenter of a coronavirus outbreak that could have a crippling effect on the global economy. The crisis could also have far-reaching consequences for China and its role in the world. An online survey carried out by the MIT Center for Transportation & Logistics on January 28 and 29, with hundreds of respondents, shows that while some firms are largely in wait-and-see mode at this early stage of the outbreak, many are starting to map out a strategy to deal with the crisis and have initiated countermeasures.