The Future State of Supply & Logistics in a Post-COVID World

My transition from the Marine Corps comes at a time when the world is reeling from a global pandemic. Supply and logistics chains across the globe have been thrown into a frenzy trying to account for the unprecedented amount of disruption in the international economy. As a result, many industries feel like they're looking down the gun barrel of financial ruin. There has been one notable exception.

"Now, more than ever, society needs supply and logistics chains that are durable, flexible, and affordable."

Operations, supply, and logistics professionals aren't looking at COVID-19 as a death sentence—they're looking at it as an opportunity. Companies like Amazon, Walmart, and Ace Hardware are ramping up their hiring instead of downsizing. Now, more than ever, society needs supply and logistics chains that are durable, flexible, and affordable. To industry professionals, this can seem like an untenable position. In most cases, they get to pick two of those traits and mitigate the loss of the third. COVID-19 represents a necessary reevaluation of industry priorities. For at least four decades, American industry professionals have been prioritizing affordability and flexibility at the expense of durability.

A durable supply and logistics chain of the future is going to need to take redundancy into consideration. The word "redundancy" is almost a taboo in an industry obsessed with just-in-time delivery and inventory control. However, in the wake of COVID, some companies have seen the disastrous effects of a sole supply source. Companies like 3M and Honeywell have effectively had their manufacturing facilities in China nationalized. The result has been a global reduction in the availability of personal protective equipment (PPE) and an expensive retooling of domestic manufacturing facilities to meet demand.

A future state might consider supply sources resembling a diverse investment portfolio with materials from multiple locations at various price points. The exact make-up of such a portfolio is the domain of data scientists and analysts, but a new distribution is necessary to gain a durable supply advantage over competitors. The system will be more complicated and to keep costs down, a smarter, more flexible procurement strategy will be necessary.

"Flexibility has always been the hallmark of a market system"

Flexibility has always been the hallmark of a market system. Arguably, the United States has had an easier time dealing with shortfalls caused by COVID-19 because of the flexibility of the American industrial system. Companies like Ford, GM, and Tesla have been able to partner with 3M to produce millions of respirators, ventilators, face shields, and other PPE. The sleeping giant of American industry has clearly been awakened, but the necessity of the awakening should be assessed.

Had 3M and Honeywell had a more flexible supply and logistics system, it's reasonable to assume that automakers wouldn't need to be producing supplies in the first place. They may have continued to produce PPE to mitigate the 39% to 55% decrease in demand the auto industry is experiencing, but it wouldn't have been a life-or-death necessity for the American people. A future state would take into account possible seizures and change in the availability of resources to shift procurement as a global crisis evolves. This would require new risk management evaluations and established contingency plans. For too long, industry has prioritized cost savings and affordability at the expense of durability and flexibility.

"COVID-19 is going to fundamentally change how companies treat material storage"

COVID-19 is going to fundamentally change how companies treat material storage. Some may set aside strategic stockpiles like the defense industry. Some may invest in more domestic manufacturing to protect part of their firms from international seizures or nationalization. Whatever companies decide to do to protect their investments, it's going to be more expensive than the status quo which affects the third pillar of industry: affordability.

For four decades the United States has been pursuing a strategy of affordability and flexibility at the expense of durability. Since the opening of China by President Nixon, firms have been increasingly outsourcing manufacturing to developing nations. The practice has been encouraged by nations like China who have artificially lowered the value of their currency to keep labor costs low. However, the relationship between American industry and China has never been sustainable, and it's taken a global crisis to highlight the disconnect.

"Despite the uncertainty of the future, it's an exciting time to enter the supply/logistics field."

The future state of American supply and logistics chains is one where affordability has to be sacrificed for durability and flexibility. It is no longer tenable to reap the benefits of low labor and material costs at the expense of redundancy. This becomes especially true when talking about life-saving drugs, PPE, and materials needed to produce those items. Despite the uncertainty of the future, it's an exciting time to enter the supply/logistics field. Professionals in these industries are going to need to redesign systems from the ground up and they may resemble ones pioneered by the defense industry. Industry leaders recognize that fact and thats why major companies are hiring more than ever.