The coronavirus COVID-19 pandemic is bringing most key business activities to a near complete halt. If you work in a product organization, activities that a few weeks ago were routine such as a team meeting for a critical design review or traveling to audit a new supplier are no longer possible.
Seemingly overnight, supply chains are stressed to the limit. Years of aggressive lean single-source supply-chain operations and hyper-speed agile product development methods expose the fragility of many organizations’ supply-chain practices.
This isn’t the first time that overly lean product design and supply-chain operations are being stress-tested. In 2011, a massive earthquake in Japan was followed by a devastating tsunami and temporarily crippled extensive parts of Japan’s auto supply chain.
The Tohoku earthquake of 2011 exposed the vulnerability of the lean and just-in-time manufacturing systems pioneered by Toyota after World War II and has been adopted by practically every automaker and supplier.
Ironically, Toyota is one of the many companies caught unprepared for the shock caused by the coronavirus outbreak that requires employees to work from home. At a recent news conference, Toyota Motor Corp. President Akio Toyoda acknowledged the company was caught by surprise: “We were not ready for telework. Work-style reform has been the buzzword. And now, we can afford no further delay in implementing it.”
A catalyst for change or a missed opportunity?
Once again, manufacturers around the world are suffering the devastating effects of a natural disaster. But will they remember the lessons of the COVID-19 crisis once it is over, or is it going to be too easy to go back to the old habits of unproductive meetings and unnecessary travel? Will supply-chain planners be willing to consider killing a few sacred supply-chain cows?
Will the COVID-19 pandemic be a catalyst for a change?
Studies show that people forget about natural disasters rather quickly and how surprisingly small effect such events have on human behavior.
Using the coronavirus crisis as a catalyst to revisit corporate strategies will be challenging for some corporate leadership. Studies of organizational learning demonstrate how corporate leaders often blame their failures on luck and events outside of their control, and, at the same time, the same executives are quick to ascribe their successes to brilliance, skill and hard work rather than luck.
The coronavirus pandemic has shown the critical interconnectedness of global businesses. But the proper response is not to undo globalization and go back vertical integration and push for in-country-only manufacturing.
Organizations should become more resilient not only in the literal sense but more so in their ability to transform and innovate in response to external events. They must become more predictive and anticipatory.
Post COVID-19 pandemic, organizations will identify metrics that define success or failure and use analytics and simulation to reach a balance between highly optimized processes and a sober ability to deal with the severity of shortage, misallocations and instability of local manufacturing.
The operational goals for the post-crisis era should be to establish a thoughtful data-driven approach to balance globalism with regionalism. Organizations should pursue two long term adjustments: developing a productive globally distributed workforce and updating their supply chain assumption, models and practices. Successful organizations will establish loosely coupled self-organizing systems that urge and propel collaboration, co-innovation and supply chain resiliency.