By Gregory Cable, C.P.M.
When considering the importance of putting focus on the supply chain during a downturn, I am reminded of a time about 25 years ago when I took lessons to get my private pilot’s license. One of the most important maneuvers taught to students is how to quickly recover from a stall — not an engine stall, but rather a condition in which one or both wings fail to produce lift. When there is no lift, the plane basically falls from the sky.
Stalls generally occur when a plane is low and slow, such as during takeoff or landing. It sounds dire, but it’s easy to recover from a stall. I remember the first time my flight instructor purposely had me stall the airplane at about 3,500 feet above the ground — although it was a safe distance for practicing such a maneuver, I was apprehensive. As we pretended to be landing, the plane got slower and slower, until finally the stall warning alarm sounded, and then whoosh — over we went, nose down. It was a gut-wrenching feeling.
What is the typical untrained reaction to having the nose of the plane suddenly tip forward, hurling you toward the earth? To pull back. Yet, that’s precisely the wrong thing to do. The key to survival in a stall is not to pull back, but rather push the yoke forward, thus gaining airspeed and lift, and only then applying gentle back pressure on the yoke to level off.
After several dozen tries at stall recovery, I not only overcame my dread of it, it became so routine that recovery became easy and second nature. The biggest challenge through it all was, through training, overcoming what my mind was instinctively telling me to do — that is, pull the yoke back too soon.
As companies hunker down to survive the coronavirus (COVID-19) pandemic, many do what comes naturally in times of crises or economic stalls — they reactively pull back, thinking that this is best in order to keep the business aloft. Pulling back comes in many forms, from such easy solutions as cutting travel and training expenses to more difficult decisions involving layoffs or shutting down parts of the business.
Business leaders all over the world are pulling back by making cuts across their companies. Supply chain departments are some of the first to be reduced, since, as many unknowledgeable business leaders believe, they “only order parts.” The logic is that since the business no longer needs as many parts, it doesn’t require as many supply management employees.
The result of pulling back on the supply chain — like pulling back on the yoke during a stall — is a recipe for disaster. One may survive the crash, but it will be ugly. Nor will the company be in a good position to compete effectively after the crash.
Enlightened leaders know that during crisis there are opportunities. The COVID-19 crisis is no exception. There are numerous opportunities to take advantage of while your competitors are making knee-jerk decisions to downsize their supply management organizations.
Three important actions must be taken immediately:
Assess your risk. How many companies have sent employees home with nothing to do and are still paying them? Why not put them to work with a list of questions to ask suppliers? Questions include:
•How has the virus impacted each supplier?
•Have suppliers altered vital production lines that make your parts in order to make medical devices?
•Have they had layoffs, and if so, how quickly can they recall those employees?
•Do they have any of your parts ready to ship (or nearly so)?
•Do they have enough component parts and raw materials on-hand to quickly ramp up when the pandemic subsides?
•Do they know your quality and delivery expectations?
•What about each supplier’s other customers — will they be competing for the same capacity when production starts up? Who will get priority?
Questions like these and many others should be asked so that you can be prepared for when the economy bounces back. It’s important to realize that past problems regarding parts and suppliers may not be the same potential problems a few months from now. There’s no excuse for being surprised when production ramps up, especially from typically reliable suppliers.
Evaluate supplier deliveries that can be pushed out and those that should be kept as scheduled. Cuts to the sales forecast can often result in dramatic recommended push outs of orders by material requirements planning (MRP). Because supply management organizations are under tremendous pressure to keep unneeded parts out of the factory to avoid an inventory increase, their reaction is to immediately pull back on the yoke.
Often, there is a significant effort spent pushing out orders, only for employees to later expend an equal or greater amount of time trying to pull those orders back in when business improves. The result can be hundreds of hours of wasted effort and opportunity cost on missed value-added activities.
Corner-office leadership is critical. “Business as normal” dictates that supply management push out orders if not needed, and unless directed otherwise, that’s what they will do. Leadership needs to make clear that the company executes only smart push outs, or at a minimum, allows the supply management organization to make push-out exceptions within certain guidelines. Inventory goals should be suspended until the crisis is over.
Assist suppliers where practical. If your risk assessment identifies a supplier in need, ask that the information be escalated to a company executive that can reach out and potentially provide assistance.
Financial assistance might not possible, but many other kinds of non-monetary assistance can be provided. If the supplier is in a hard-hit area, sending disinfecting supplies —even toilet paper — might be a simple and inexpensive way to help. At a minimum, just the act of reaching out will leave a lasting impression on the supplier. Goodwill goes a long way, and your act of kindness will not be forgotten.
Gregory Cable, C.P.M., is a supply management senior consultant and principal with CGHM Consulting in Fairhope, Alabama.