Global Supply Chain Wisdom from Coronavirus-Colored Lenses
By Chris Oleksy, Founder and CEO, Oleksy Enterprises and Co-Founder Next Life Medical; CEO, Emergent Respiratory | 04.01.21
There are precious pearls of wisdom from this past year that will come in handy during the next “crisis.”
The past 13 months have been quite surreal. It seems like the pandemic-induced journey the world has been on for the past 400 days or so began a lifetime ago. Personally, this past year has felt like a dog’s first year of life, which generally equates to 15 human years. The supply chain lessons learned over the past year have been so numerous, it theoretically could have taken 15 years to amass them. There are some precious pearls of wisdom from this past year that will definitely come in handy during the next “crisis,” whatever form that may take and whenever that may be. Hopefully the lessons will help companies create a supply chain “playbook” they can use as they continue to navigate COVID-19 and prepare for the next unforeseen event.
Where’s Waldo? (Data/Information)
One of the most important lessons to be learned from the pandemic is the value of reliable information. As COVID-19 ravaged the world, there was plenty of data available, but very little of it was actually trustworthy information. Many attribute this shortcoming to election year politics, and that’s certainly a rational argument. But the election is over and the data/information dilemma has not changed. From the corporate boardroom to the shop floor employee, it has become practically impossible to navigate through the maze of misinformation that currently exists. I still don’t know how many ventilators were needed or may still be needed in New York City. And, how many doses of a vaccine are needed? How long does immunity last? Do masks work? If so, which ones are most effective? It’s not hard to understand why record numbers of viewers have stopped watching the news or listening to politicians (both parties). We need data sources that are accurate rather than agenda-based.
I learned at the start of my supply chain career that reliable data is necessary to produce actionable information. If data cannot be used to make decisions, why even bother gathering it in the first place? Think about how many metrics are created with poor data inputs. The golden rule of garbage in equals garbage out is always applicable to the major supply chain SCORE elements of Plan Source Make Deliver, particularly during a crisis. Reliable data for informed decision-making is now so scarce that many of my closest colleagues are calling each other to find dependable information.
Lesson/Nugget 1.0: Companies should create a data/information “war room” of sources and trusted content that can be called upon when crises occur. Stay close to customers and suppliers because both have a vested interest in the information their OEM partner relies on is accurate. And both can help companies safely navigate past the crisis.
2.0 Made in America: The Math Doesn’t Always Work
I support the “Made in the U.S.A.” mentality and have strived to build or help build products in America wherever logical. But I’ve also created many landed cost supply chain models to show it’s cheaper to make a product outside of the United States. Sometimes the transportation freight costs alone are more expensive than the product value itself, especially when shipping internationally. Such logic was at play two decades ago when I encouraged a previous employer to open a plant in Costa Rica, as the shipping costs far exceeded the value of products being shipped. What some may deem un-American is actually common sense. Businesses are not charities—for-profit companies cannot stay afloat long without gains. Nor can they sustain payrolls.
Another sobering fact is that no one country has all the necessary raw material sources for domestically manufacturing 100 percent of its products, as some resources can only be found in one place on Earth (i.e., the Horn of Africa). However, one of the most overlooked resources is labor.
On a fairly regular basis, but particularly in election years, both political parties have sounded the “Made in America” alarm. I’d love to, but the labor math doesn’t work. Even if it was possible to domestically source and manufacture all raw materials and products, there wouldn’t be enough American workers to carry out the task. Case in point: Not too long ago, the U.S. unemployment rate was 3.8 percent, which many economists consider “full employment.” Hence, there would be a shortage of labor to handle the volume of products American companies make abroad. It’s not un-American, it’s fact. According to the Nov. 20, 2020, issue of The Kiplinger Letter, Asia accounts for 39 percent of the world’s gross domestic product (GDP). Over the next 20 years, that GDP is estimated to grow to 50 percent. Isn’t it more logical to make product in Asia rather than ship products there from America?
Lesson/Nugget 2.0: Companies must embrace the world and all its imperfections. Raw materials come from every corner of the globe and so should the workforce. The pandemic has proven that America-first policies are pointless; rather, the United States must embrace the use of the world’s raw material sources (including labor) and foster positive trade relations. When a crisis like COVID-19 occurs, every worker counts, regardless of the country of residence. America should be more interested in how its manufacturing base can help “supply” that 50 percent of Asia’s GDP and produce it in the most financially sensible location. Supply chain success and America’s future prosperity will depend on the nation’s ability to “supply” rather than simply “make” product domestically.
Single Source vs. Duplicate Capacity: Time to RE-think?
Like many of my supply chain colleagues, I’ve believed it to be too cost prohibitive to duplicate an organization’s capacity or supply lines. The risk/reward narrative historically was skewed in favor of no repeats until COVID-19 came about. It’s become obvious that worldwide supply chains are very interconnected, and rightly so. Much like the “Made in America” economics, duplicating supply chain capacity across the globe makes more financial sense now and will better prepare these distribution channels for future (unforeseen) crises. I’m not predicting another pandemic to occur, but I do expect supply chains to be more prone to disruption going forward as they become interdependent in order to manage global consumption growth. Viruses, after all, are not the only disruptors—Mother Nature can be pretty capricious when she wants to and politics can impact product supply.
During my 40-year career, accessibility to the world and its supply chains has changed dramatically, and so has its growth. Thus, duplicating capacity (and potentially suppliers) in various parts of the world should be on every multinational organization’s radar to manage global consumption needs and risk management. A supply chain professor friend once told me that over 40 years, the same test still applies but the answers change. That certainly was the case this past year.
Lesson/Nugget 3.0: Companies should reconsider duplicating critical portions of their supply chains to better manage both impending global growth and risk management needs. This could necessitate contracting two different suppliers or a single supplier with multiple locations.
The Rise of the “Mom and Pop Shop”
Being the son of a career banker in the 1970s, I saw a prediction my father made back then come true over the past decade. He said, “…the banks will be consolidated. All ‘mom and pop shops’ will become consolidated because of the economies of scale. Big banks will become more important than the local banker always being there to help you. But there is a time and a place for economies of scale. When the going gets tough for consumers, the importance of the small bank will become a requirement, not a necessity.” He didn’t live long enough to see that reality manifest itself as local banks have multiplied nationwide over the past 20 years. Many consumers actually prefer a local bank over their large multi-billion-dollar rivals. Case in point: It’s not a coincidence that many individuals sought PPP loans from local banks due to their short turnaround times.
The medical device industry has witnessed a similar consolidation at the OEM and at supplier levels. Over the past year, I’ve heard praise for the speedy, innovative ways mom and pop shops responded to supply chain needs during the COVID-19 crisis. Was their response more related to the crisis itself or their ability to be more nimble and agile than their larger competitors? I believe the latter may be manifesting itself as the banking history repeats itself in the medtech industry.
Lesson/Nugget 4.0: Don’t under estimate mom and pop suppliers. That “flotilla of destroyers” over the battleship can be quite effective in good times and bad. In all wars, there’s a place for a battleship and a place for a flotilla of destroyers that is nimble and customer focused.
The coronavirus has taught the world many lessons over this past dog year of a year. Hopefully, medtech organizations have gained some insight into operational improvements and supply chain best practices they can implement going forward. There are certainly many more lessons to be gained from the COVID-19 pandemic, which will be addressed in future columns. One of those will most likely discuss the importance of U.S. school systems (including day cares) in providing needed labor to the workforce. But there’s a twist: The key is not necessarily what children learn in schools but rather what they can provide to the medical device eco-system. The lessons here are surprising. Stay tuned.
Chris Oleksy is founder and CEO of Oleksy Enterprises, co-founder of Next Life Medical and CEO of Emergent Respiratory. He can be reached at chris@oleksyenterprises.com or chris@nextlifemedical.com.
Where’s Waldo? (Data/Information)
One of the most important lessons to be learned from the pandemic is the value of reliable information. As COVID-19 ravaged the world, there was plenty of data available, but very little of it was actually trustworthy information. Many attribute this shortcoming to election year politics, and that’s certainly a rational argument. But the election is over and the data/information dilemma has not changed. From the corporate boardroom to the shop floor employee, it has become practically impossible to navigate through the maze of misinformation that currently exists. I still don’t know how many ventilators were needed or may still be needed in New York City. And, how many doses of a vaccine are needed? How long does immunity last? Do masks work? If so, which ones are most effective? It’s not hard to understand why record numbers of viewers have stopped watching the news or listening to politicians (both parties). We need data sources that are accurate rather than agenda-based.
I learned at the start of my supply chain career that reliable data is necessary to produce actionable information. If data cannot be used to make decisions, why even bother gathering it in the first place? Think about how many metrics are created with poor data inputs. The golden rule of garbage in equals garbage out is always applicable to the major supply chain SCORE elements of Plan Source Make Deliver, particularly during a crisis. Reliable data for informed decision-making is now so scarce that many of my closest colleagues are calling each other to find dependable information.
Lesson/Nugget 1.0: Companies should create a data/information “war room” of sources and trusted content that can be called upon when crises occur. Stay close to customers and suppliers because both have a vested interest in the information their OEM partner relies on is accurate. And both can help companies safely navigate past the crisis.
2.0 Made in America: The Math Doesn’t Always Work
I support the “Made in the U.S.A.” mentality and have strived to build or help build products in America wherever logical. But I’ve also created many landed cost supply chain models to show it’s cheaper to make a product outside of the United States. Sometimes the transportation freight costs alone are more expensive than the product value itself, especially when shipping internationally. Such logic was at play two decades ago when I encouraged a previous employer to open a plant in Costa Rica, as the shipping costs far exceeded the value of products being shipped. What some may deem un-American is actually common sense. Businesses are not charities—for-profit companies cannot stay afloat long without gains. Nor can they sustain payrolls.
Another sobering fact is that no one country has all the necessary raw material sources for domestically manufacturing 100 percent of its products, as some resources can only be found in one place on Earth (i.e., the Horn of Africa). However, one of the most overlooked resources is labor.
On a fairly regular basis, but particularly in election years, both political parties have sounded the “Made in America” alarm. I’d love to, but the labor math doesn’t work. Even if it was possible to domestically source and manufacture all raw materials and products, there wouldn’t be enough American workers to carry out the task. Case in point: Not too long ago, the U.S. unemployment rate was 3.8 percent, which many economists consider “full employment.” Hence, there would be a shortage of labor to handle the volume of products American companies make abroad. It’s not un-American, it’s fact. According to the Nov. 20, 2020, issue of The Kiplinger Letter, Asia accounts for 39 percent of the world’s gross domestic product (GDP). Over the next 20 years, that GDP is estimated to grow to 50 percent. Isn’t it more logical to make product in Asia rather than ship products there from America?
Lesson/Nugget 2.0: Companies must embrace the world and all its imperfections. Raw materials come from every corner of the globe and so should the workforce. The pandemic has proven that America-first policies are pointless; rather, the United States must embrace the use of the world’s raw material sources (including labor) and foster positive trade relations. When a crisis like COVID-19 occurs, every worker counts, regardless of the country of residence. America should be more interested in how its manufacturing base can help “supply” that 50 percent of Asia’s GDP and produce it in the most financially sensible location. Supply chain success and America’s future prosperity will depend on the nation’s ability to “supply” rather than simply “make” product domestically.
Single Source vs. Duplicate Capacity: Time to RE-think?
Like many of my supply chain colleagues, I’ve believed it to be too cost prohibitive to duplicate an organization’s capacity or supply lines. The risk/reward narrative historically was skewed in favor of no repeats until COVID-19 came about. It’s become obvious that worldwide supply chains are very interconnected, and rightly so. Much like the “Made in America” economics, duplicating supply chain capacity across the globe makes more financial sense now and will better prepare these distribution channels for future (unforeseen) crises. I’m not predicting another pandemic to occur, but I do expect supply chains to be more prone to disruption going forward as they become interdependent in order to manage global consumption growth. Viruses, after all, are not the only disruptors—Mother Nature can be pretty capricious when she wants to and politics can impact product supply.
During my 40-year career, accessibility to the world and its supply chains has changed dramatically, and so has its growth. Thus, duplicating capacity (and potentially suppliers) in various parts of the world should be on every multinational organization’s radar to manage global consumption needs and risk management. A supply chain professor friend once told me that over 40 years, the same test still applies but the answers change. That certainly was the case this past year.
Lesson/Nugget 3.0: Companies should reconsider duplicating critical portions of their supply chains to better manage both impending global growth and risk management needs. This could necessitate contracting two different suppliers or a single supplier with multiple locations.
The Rise of the “Mom and Pop Shop”
Being the son of a career banker in the 1970s, I saw a prediction my father made back then come true over the past decade. He said, “…the banks will be consolidated. All ‘mom and pop shops’ will become consolidated because of the economies of scale. Big banks will become more important than the local banker always being there to help you. But there is a time and a place for economies of scale. When the going gets tough for consumers, the importance of the small bank will become a requirement, not a necessity.” He didn’t live long enough to see that reality manifest itself as local banks have multiplied nationwide over the past 20 years. Many consumers actually prefer a local bank over their large multi-billion-dollar rivals. Case in point: It’s not a coincidence that many individuals sought PPP loans from local banks due to their short turnaround times.
The medical device industry has witnessed a similar consolidation at the OEM and at supplier levels. Over the past year, I’ve heard praise for the speedy, innovative ways mom and pop shops responded to supply chain needs during the COVID-19 crisis. Was their response more related to the crisis itself or their ability to be more nimble and agile than their larger competitors? I believe the latter may be manifesting itself as the banking history repeats itself in the medtech industry.
Lesson/Nugget 4.0: Don’t under estimate mom and pop suppliers. That “flotilla of destroyers” over the battleship can be quite effective in good times and bad. In all wars, there’s a place for a battleship and a place for a flotilla of destroyers that is nimble and customer focused.
The coronavirus has taught the world many lessons over this past dog year of a year. Hopefully, medtech organizations have gained some insight into operational improvements and supply chain best practices they can implement going forward. There are certainly many more lessons to be gained from the COVID-19 pandemic, which will be addressed in future columns. One of those will most likely discuss the importance of U.S. school systems (including day cares) in providing needed labor to the workforce. But there’s a twist: The key is not necessarily what children learn in schools but rather what they can provide to the medical device eco-system. The lessons here are surprising. Stay tuned.
Chris Oleksy is founder and CEO of Oleksy Enterprises, co-founder of Next Life Medical and CEO of Emergent Respiratory. He can be reached at chris@oleksyenterprises.com or chris@nextlifemedical.com.
