The Greatest Supply Chain Disruptions and What We Learned

When I graduated college with my shiny new Supply Chain Management degree, I figured I was heading into my first job to work on supplier contract negotiations, optimizing production line output, and all of the other 'sexy' supply chain management strategy we had spent two years learning about.

It was 11PM on a weekday when I received the phone call. I was about three months in to my first job as a plant floor buyer/planner at a manufacturing firm. I wore a hard-hat, steel-toed boots, and earplugs to work every day. A far cry from my sizable expectations (I had bought a suit!) when I walked across the graduation stage.

"That shipment of castings didn't come in tonight" shouted the second shift production supervisor. I gulped.

"Ok, I will call the supplier first thing in the morning and find out," I said, timidly.

"No man, the line is out. The guys have no work on the line and third shift will be here in an hour. We need castings ASAP!"

"Ok, let me call the supplier and see what I can do," I managed to stammer out.

I could not do anything, could not get a hold of anyone at our casting supplier nearly 200 miles away. I was probably a hero for third shift that night, who sat around talking and cleaning the production lines instead of making engine brakes. I imagine a scene similar to Shawshank Redemption, with Andy Dufrense and the rest of the Shawshank crew drinking suds on top of the newly painted roof.

That was the thud back to reality for me. I think I stocked out the production line in my little area of the plant once or twice more.

It was embarrassing, frustrating, and, wait for it…enormously beneficial to the trajectory of my learning curve and career thus far.

The thing is, we do not tend to weight our negative career experiences the same way we do our successes. We too easily forget them, put them aside, and focus on what has gone right for us. That's a shame, because we can learn so much from the bad times in our professional careers.

In an ode to my former, fresh out of college self, here are a few famous supply chain disruptions and what we learned, and are still learning, from them.

Boeing Dreamliner Launch Delays

In the early 2000's, world-famous aircraft manufacturer Boeing set out to develop the state-of-the-art passenger plane now known as the 'Dreamliner.' But the road from development to first delivery to All Nippon Airways was anything but dreamy. Significant delays in the timeline caused Boeing heartache in the form of late delivery fees, stock price dip, and a negative company image. Most of the issues point back to poor supply chain planning.

Boeing took a page from the automotive industry with their Dreamliner program, and developed key tier-I suppliers as integrators for their product. They outsourced more than they ever had before for an aircraft, in an effort to accelerate the launch timeline and take advantage of key supplier competencies around the globe. It turns out building an aircraft takes a bit more coordination of activities across a wider range of product categories than an automobile.

Supplier delays at certain integrators had cascading consequences down the value chain. And with their new heavy outsourcing strategy, Boeing was less agile – they could not simply absorb the delayed work at one of their facilities. Their reliance on the carefully constructed supplier network of integrators was too tight and, as delays started to mount, the problems magnified. It got so bad Boeing even bought one of their suppliers to gain tighter control – and avoid a supplier bankruptcy.

When Boeing finally delivered their first Dreamliner, they had experienced a worker strike, millions in late fees to customers, supplier cash flow disasters, a hit to their company image, and a famous supply chain case study.

We all outsource. We can all commiserate with Boeing when it comes to poor performing suppliers that shine a spotlight on a company's supply chain practices. But we have a supply management toolbox that can help to significantly mitigate the most critical risks when it comes to outsourcing.

First, does it make sense to outsource? Have we, as supply management professionals, worked with the critical internal stakeholders to understand the nuances of the category? Have we gained alignment with them that outsourcing a specific product or entire category is possible and it links directly to company objectives?

Second, give some thought to what the KPI's will be that will tell you the score, whether or not you are winning or losing the outsourcing game. A few examples would be a cost variance tracker that measures the ongoing make vs. buy costs, customer satisfaction, product margin, and product quality.

Next, If you are relying heavily on one supplier as a key outsourcing partner, take the time to do the SWOT (strengths, weaknesses, opportunities, threats) analysis. This will help you plan for the unexpected and identify some potential competitors that will mitigate any of the inherent risks with single sourcing.

Finally, brainstorm ways to keep the supplier engaged and motivated to not only meet expectations like on time delivery, cost, etc. but to continuously improve in ways that add value to the partnership over time. Keep each other honest with scorecards that have metrics that go both ways (hello, on time payment %)! Maybe a formal continuous improvement program with a 50/50 savings split makes sense for your key partnership.

While we may not all manage supply chains for products as complex as Boeing's, we can all learn from this complex supply chain failure and improve our company.

PPE Shortage in the US During Covid-19 Pandemic

This one hits home. My beautiful wife was 30+ weeks pregnant when the first Covid patient in our area arrived at the hospital she works at. She got a phone call from her boss as we were painting our oldest son's room. Two patients she had provided direct care for the day prior had now tested positive for Covid-19. Monitor for symptoms, she was told, but no test as there were too few to give to people with contact but no symptoms. So she continued to drag her pregnant belly into work for 12-hour hospital shifts. That was until things got so bad in her unit that she was put on medical leave a few weeks before our second child was born. When she left for medical leave, N95 masks were being washed by the hospital and provided back to the original wearer. A frontline worker in the US with direct exposure did not have a clean N95 mask to wear everyday – let that sink in.

So what have we learned from the well-documented failure of the US government's and many large US hospital system's failure to adequately stock critical PPE?

First, there are force majeures. I had a career-first in late March when a supplier, struggling with delivery, presented me with a force majeure letter, per our contract. The pandemic had forced them to operate with an extremely limited workforce which meant the delivery schedule for the foreseeable future would be greatly impacted. We have all probably read over and even signed these clauses into contracts as they are fairly boilerplate nowadays. But did you think that you would be faced with having to react to this in your own supply chain? I can sheepishly say I did not, but I learned some things that have helped me prepare for the future.

Secondly, all product categories should be ranked on a simple graph with 'Likelihood of Supply Disruption' on the X axis and 'Impact to Business' on the Y axis. Suppliers with manufacturing footprints heavily focused in Eastern Europe and Asia will have a worse ranking when it comes to the likelihood of supply disruption than a supplier here in my backyard of metro-Detroit. If a supplied material is used in almost every finished good that your company produces but there are many suppliers across the globe that supply to your company, then the 'impact to business' is probably at least a medium. If it's a sole-sourced supplier, that impact goes to the top of the chart. Focus on the high likelihood, high impact products first, then moving to the high impact, lower likelihood next. Simple risk mitigation strategies like increasing safety stock for these 'high impact' materials, additional supplier qualification, and conversations with suppliers on their business continuity plans (BCP's) in the face of disruptions will all make a big difference.

Lastly, work cross-functionally with your colleagues in Sales and Marketing management to understand the appetite for risk by product categories and develop your company's own segmented BCP's. Is there a product you sell that could be stocked out for 3 months and hardly move the needle when it comes to company revenue? Ok, then focus on a BCP for a product that could be stocked out for 3 hours and wreak havoc for your customers and affect your company's current and future financials in a big way.

Take the time to plan for risk and you will be rewarded handsomely.

Fukushima Nuclear Disaster

A devastating earthquake and subsequent tsunami struck Japan in March of 2011. I can still remember watching the news during a visit to my Grandfather's house that day, wondering how a giant wave could result in such a catastrophic loss of life and property. The ripples from that tragic day were felt across the globe in many forms. What, exactly, did we learn as supply management practitioners?

First and foremost, there are more important things in life than our careers. Nearly 20,000 people lost their lives during this one tragic event in Japan. The same sentiment goes for any natural disaster force majeure. It is good for the soul to take a moment to reflect on how lucky you are to be planning your supply chain reaction to the event rather than a loved one's funeral.

The next learning point comes in a very basic piece of advice. Have you thought about potential substitute materials and/or services for the categories under your management? For example, maybe there is a different nylon or metal alloy that could provide at least a very close form, fit, and function than what you are currently sourcing. Could it suffice at least until the supply chain picks up the pieces and gets back to its feet? Many global companies had to do exactly this in 2011 when silicon wafers, liquid crystal displays, and other critical electronic materials were greatly affected by the earthquake and tsunami.

The significance of supply chain mapping was another key learning point from this event. Our first and foremost goal in supply chain management is to maintain supply continuity for our business and, ultimately, our customers. How can we achieve this goal if we do not know where our product is coming from? Now, we probably all have a solid grasp of where our direct suppliers have a manufacturing presence and maybe even their suppliers. But in the spirit of 'you are only as good as your weakest link' it is almost always worth digging a bit deeper into the upstream side of the value chain. You may be pleasantly surprised that there is an abundance of third tier suppliers able to maintain supply. Or you may have stumbled across a massive weakness within your supplier network – bonus points if you did this before there was a supply disruption.

If there is one last key takeaway from this tragedy in Japan, and one that I see as perhaps a glaring weakness in the supply management profession in general, it is how easily we tend to forget. In 2011 after the tsunami, there was much talk around having back-up or redundant suppliers across the globe for certain products. But risk planning and execution comes with a price tag, and many companies fell into old habits over the past decade – single sourcing for cost reasons. It is an extraordinarily delicate balance for all of us to try to strike, and how we attempt to plan for these risks can have enormous consequences for all of our stakeholders.

We can learn from not only these famous supply chain case studies, but our own failures and slip-ups as well. Take some time to reflect on your worst misfires in your career – what would you do differently this time around? For me, I'll make sure to tell my sons not to buy a suit until they need one 😊