Dealing with delivery bottlenecks – can we predict the unpredictable next time?
Delivery bottlenecks in times of trouble
Generally speaking, supply shortages were caused by two factors: Due to the concentration of production in the Far East, at the beginning of the epidemic there were either supply bottlenecks caused directly by shutdowns - the production facilities were closed - or by the continuing impact on the global movement of goods: where there were no scheduled flights for passenger traffic, there were no bellies in the planes that could be filled with goods. Where there were no transports of shipping containers, there were no containers to load at the other end of the supply chain.
The second factor was, of course, the sharp increase in demand: simple consumables for laboratory work, such as Petri dishes, reaction vessels and pipette tips were in short supply and the lack of protective clothing endangered sterile work and thus the research cell culture or the production of medicines or diagnostic tests - not to mention protective clothing for staff on the medical front, where also swabs for taking samples were soon on shortage.
As far as the procurement of materials was concerned, it was wild west: suppliers of raw materials necessary to produce a SARS-CoV-2 PCR as well as suppliers of complete test kits, suddenly only supplied to their major customers , an approach that threatened to deprive smaller biotech companies and medical laboratories of their business basis. There was even the case that a shipment of rapid tests for Corona, which were already on an airplane in the Far East ready for take-off, had to be unloaded by governmental decree – the beginning of trade measures affecting the whole world and concerning all kinds of goods, but foremost protective material like rubber gloves, face masks, ventilators - and pharma.
This was the hour of small companies, which up to then had only been able to achieve the smallest market shares. Whereas under normal circumstances it is usually challenging for small companies to establish a new test or instrument in a laboratory — due to the quality standards accredited laboratories have to fulfill, the costs a change means and against the market power of the big companies— Corona made the decision-makers leave their objectives behind very quickly: some laboratories now even use Corona test kits from many different suppliers in parallel to meet demand. Smaller laboratories start to work with PCR and need the equipment from a sold-out market – the lucky distributor who can beat the delivery time of eight weeks by the market leader with a small supplier
from an exotic country (at least in terms of med tech know-how). This suddenly brought many small companies into the sales regions they never had imagined before.
Another positive effect of the Corona crises is that the diagnostic industry gained more importance and won reputation. Before Corona, patients were rather oblivious of the whereabouts of their blood sample and what the results in the end meant – not many people knew that sometimes the word “positive” describes the opposite when comes to medical terms. The awareness has grown, many more people are interested in scientific topics, they listen to podcasts and read. If you mention now that you work in the diagnostic area, people appreciate your work.
Becoming more resilient to risk exposure
Given that there will be similar events like the corona-crisis in the future due to climate change and a massive increase in the world’s population (to name just a few), we need to adapt our mindsets to the new unpredictability of our age to stay agile. If events like COVID-19 hit us so shockingly, we may need to find out ways to deal with future events that come with little or no warning. Being completely honest - it is not debatable if we need to prepare for this uncertain future, but how to practically get ready for take-off to respond more quickly next time. Thus, we can take our new experience with this sudden pandemic as a chance to develop ourselves. Obviously, opening our eyes to our own mistakes and investigate which steps have been success or failure in dealing with the pandemic effectively would be a first crucial step. In addition, it may help to engage with other people cross-organisationally to find out how they deal with the situation concretely – after all, we are all in the same boat and can learn from each other. In operational terms, some laboratories have begun to use test kits from many different suppliers to meet their demand. Thus, building more redundancy into supplier networks seems to be a reasonable idea to serve as a buffer for a rapid increase in demand. Moreover, today’s technology and the rise of predictive analytics paves the way for a smart approach to risk monitoring. Building on huge databases, some companies might even start to run scenarios (to be specific, statistical simulations) to investigate the change in demand under certain circumstances such as financial crisis, extreme weather conditions or sudden pandemics. Apart from the fact that you may want start to hire data scientists and may want to monitor your inventory more closely in real time, you may now wonder if
your team has the competencies in their behavioral toolbox that make them future-ready. The corona pandemic might have taught us that we can be more readily equipped if we consider even the most unlikely options during decision-making. Therefore, a strategic mindset seems to be more valuable than ever before because it is not only characterised by a good sense for future developments or the foresight to include downstream impacts before making decisions, but also by the ability to investigate complex problems from different angles (Goldman & Scott, 2015). A leader able to identify cause-and-effect relationships in such a globally interconnected world might thus get a deeper understanding of the situation earlier and thus get the organisation ahead in time.
We live in exciting times and the Life-Science industry has gained in significance: finally, everybody understands that health is such a valuable good. However, people are looking forward going back to normal – but will we ever really go back to what was experienced to be “normal”? A comfy and steady state? We believe that continuous change will probably be the new normal. In this case, we better develop the most resilient versions of ourselves, keep our eyes open to the least likely and build businesses that are well equipped to buffer sudden disruptions.
Goldman, E., & Scott, A. R. (2016). Competency models for assessing strategic thinking. Journal of Strategy and Management.
Lund, S., Manyika, J., Woetzel, J., Barriball, E., Krishnan, M., Alicke, K., Birshan, M., George, K., Smit., S., Swan, D., Hutzler, K. (2020). Risk, resilience, and rebalancing in global value chains. McKinsey Report. Available here: mck.co/3fzOjLh